9. Memorandum From the Administrator of the Agency for International Development (Bell) to President Johnson1
SUBJECT
- Use of Foreign Aid Funds
This memorandum reports on
- — progress in committing funds available in the present fiscal year
- — progress in expending funds previously committed and in the pipeline
We are making satisfactory progress in committing funds available in fiscal year 1964. Our latest estimates are that, excluding the Contingency Fund, which is drawn on only to meet extraordinary situations, we expect to commit more than 97 per cent of the available funds for both military and economic aid. Commitments to date, while slow as always, reflecting the late date of Congressional action, are in most cases ahead of last year at this time.
| Funds Available | Commitments thus far (latest data) | Per cent | Anticipated Commitments by June 30 | Per cent | |
| Military Aid | 1200.0 | 962.6 | 80.2 | 1175.0 | 97.9 |
| Economic Aid | 2145.0 | 1343.6 | 62.6 | 2075.0 | 96.7 |
| Contingency Fund | 127.9 | 7.9 | 6.2 | ? | ? |
(Note: Above figures assume $50 million transfer from Contingency Fund to Military Aid)
With respect to military aid, as you know, total funds available are short of minimum requirements. We are proposing an initial transfer of $50 million from the Contingency Fund to military aid, (papers are on their way to you now), and are considering the possibility of an additional transfer later this month.
The only military aid funds expected to be uncommitted as of June 30th are the small residual amounts left in the various sub-accounts in Washington and the field. These usually total around $25 million.
With respect to economic aid, our record on uncommitted balances is expected to be much more impressive this year than last. The most striking change relates to Development Loans, outside of Latin America, where the last fiscal year ended with $96 million uncommitted. This year, we expect to commit all available funds, (including the $96 million carried forward from last year), and to have a number of projects on hand and fully reviewed on June 30 for which funds will not be available till next fiscal year.
As in the case of military aid, we expect to have small residual amounts remaining on June 30 in various economic aid sub-accounts. These usually total around $25 million or one per cent of available funds.
Apart from these, the only uncommitted economic aid funds are expected to be in the Alliance for Progress loan funds, where we may have up to $50 million uncommitted as of June 30, depending on developments in Brazil. We have a solid argument with which to defend this fact before the Congress: we are properly holding to high standards of self-help on the part of Latin American countries, and during the current fiscal year this has required program restrictions, particularly in Argentina and Brazil.
With respect to the Contingency Fund, there is of course no plan for full commitment. About $22 million has been authorized thus far and [Page 18] another $25 million seems likely to be committed for normal uses. A transfer of $50 million is now assumed. As of today, therefore, the uncommitted balance is estimated at about $80 million, less whatever further amount may be transferred to military aid.
We are also making good progress in expending obligated balances. The “pipeline” of unexpected commitments as of June 30, 1963 was $6,369 million. Two-fifths of the pipeline represented loans in process of being drawn down as projects are completed. Another two-fifths represented military assistance orders in process of production and delivery.
During the present fiscal year we expect expenditures to exceed new commitments in all categories except Alliance loans. Therefore, we expect a drop of more than $300 million in the pipeline of unexpended commitments by June 30, 1964.
During the last three or four years the assistance pipeline has increased sharply, but the entire increase has been in undisbursed loans. We have checked our experience with that at the World Bank and the Export-Import Bank and our record is just about the same as theirs. An agency which starts making development loans, as this one did on a large scale three or four years ago, must expect to build up undisbursed loan commitments for the first several years—until the rate of disbursements in a year equals the rate of new commitments. We have now reached that point with respect to development loans outside of Latin America. We have not yet reached that point with respect to loans under the Alliance.
Attachments A and B show current commitments and the pipeline in somewhat more detail.
We will be glad to furnish any additional information you may wish.