Office of the Historian

884A.00 TA/6–2253: Telegram

No. 628
The Secretary of State to the Embassy in Israel1

confidential
Washington, June 22, 1953—7:13 p.m.

1139. Joint State-DMS. Following principles should be considered as guidelines in operation grant program in Israel:

1.
Primary objective of Aid Mission should be hastening viability of Israel. In administration of program we should seek to achieve maximum influence on the economic policies of GOI and maximum impact on economy as a whole, recognizing relationship internal conditions to external viability. US influence can be focused upon problems internal and external stability through (a) continuous consultation and review of Israel foreign exchange expenditures; and (b) vigorous control over amount, rate, and purposes of release both dollar and counterpart funds. Consultation machinery was established by IG note August 1952.
2.
Following specific objectives should be sought by means outlined in (1) above:
(a)
Achievement and maintenance of internal economic stability through encouraging GOI to adopt appropriate fiscal and monetary measures designed to retard inflation, bring about most effective use of resources and reduce need for external aid.
(b)
Adoption and maintenance (through periodic revision when necessary in light of foreign exchange position) of exchange budget in which current foreign exchange expenditures, including amortization payments on long-term debt, are balanced against foreign exchange income. In view various uncertainties respect income and debt turn-over foreign exchange budget should be subjected continuous review. Licensing and procurement system should be made sensitive to revised exchange budget;
(c)
The allocation of the maximum amount of resources to investment designed to make Israel self-supporting in shortest possible time;
(d)
This necessarily means minimizing consumption;
(e)
Heavy exchange commitments by Government for industrial investment not based on local resources should be discouraged. Investment in industry should be made only after careful analysis full direct and indirect foreign exchange costs and with special encouragement to private capital investment; internal and external. Priorities should be developed on basis such analysis.

Dulles
  1. Drafted in the Technical Cooperation Administration.↩