135. Paper Prepared in the Agency for International Development0
DOLLAR REPAYABLE DEVELOPMENT LOAN TERMS
I. Scope of Paper
This paper sets out the criteria which govern the establishment of the terms of all AID dollar repayable development loans. These loans include those which may be made under the authority of Chapter 2, Titles I (Development Loan Fund) and II (Development Grants and Technical Cooperation) and Chapter 4 (Supporting Assistance).
The purpose of the paper is to assure reasonable consistency in the establishment of AID loan terms.
II. Basic Criteria
- A.
- AID loan terms will be based primarily on an estimate of the borrowing country’s capacity to service long-term foreign debt.
- B.
- A 40-year maturity, 3/4 of 1 percent credit fee and 10-year grace period will be applied to most of the less-developed countries.
- C.
- When analysis of long-term foreign debt-servicing capacity shows that a particular nation’s prospects are more favorable than that of most of the countries, harder terms will be applied.
III. Combinations of Development Loan Terms
Either of the following two combinations of terms will be employed as appropriate unless other terms have been approved by the Administrator.
| (A) | (B) | |
| Maturity | 40 years | 15, 20 or 25 years |
| Grace Period | 10 years | 0 to 5 years |
| Interest | 3/4% credit fee | 3/4%, 3-1/2% or 5-3/4% |
IV. Application to Specific Countries
- A.
- On the basis of a periodic world-wide review, the combination of terms applicable to each potential borrowing country is established in Attachment A.
- B.
- The Administrator will approve any changes in this pattern in the absence of a world-wide review.
V. Other Considerations
- A.
- Terms for short-term, emergency balance of payments or budget support requirements will include a maturity of up to 5 years, 3-1/2 (or more) percent interest and a grace period when necessary not to exceed two years.
- B.
- For loans to private borrowers and to public self-liquidating revenue-producing projects, procedures will be utilized to maintain a normal debt burden on such borrowers without unduly aggravating the host country’s balance of payments difficulties. Thus, in the usual case, a two-step arrangement will be concluded between the borrower, the host government and AID, which provides for dollar repayment by the borrower on normal terms (approximating Export-Import Bank terms). However, this loan may be repaid in local currency to the host government, which then will assume the obligation to repay AID in dollars but on terms similar to those which otherwise would be established by AID for direct loans to the host government.
AID also retains discretion when appropriate, to establish direct loans on normal terms to private enterprise and revenue-producing self-liquidating public projects.
- Source: Washington National Records Center,RG 286, AID Administrator Files: FRC 65 A 481, Development Financing, FY 1962. No classification marking. The source text, labeled “FINAL DRAFT,” was forwarded under cover of a memorandum from Easum to AID Executive Staff, April 4, for discussion at a meeting of the Executive Staff on April 5 at 8:30 a.m. For an unofficial record of discussion of this meeting, April 5 (ES/RA-23), which was attached to the source text, see the Supplement.↩