Foreign Relations of the United States, 1981–1988, Volume XXXVIII, International Economic Development; International Debt; Foreign Assistance

200. Memorandum From the U.S. Executive Director of the International Monetary Fund (Dallara) to Secretary of the Treasury Baker¹

Washington, March 27, 1986

SUBJECT

• Adoption of U.S. Trust Fund Proposal

With virtually unanimous support, the U.S. modified proposal for use of IMF Trust Fund reflows was approved yesterday by the IMF Executive Board. The decision taken by the Board creates a new facility, the 2.7 billion SDR “Structural Adjustment Facility,” (SAF) which will be complemented by World Bank and other resources in support of comprehensive growth-oriented economic programs of low-income countries with protracted balance of payments problems. Operations will begin immediately as the U.S. proposal has also been accepted by the World Bank Board.²

Our lobbying efforts with the Latin and Sub-Saharan African countries in recent weeks proved effective, as Directors representing those countries modified their positions, and yesterday indicated outright support, or at least, acceptance of our approach. In the end, almost all Directors associated themselves with the decision.

The Board’s decision was the final step required for the implementation of the initiative that you introduced in Seoul. As directed by the Interim Committee in Seoul, however, a report on the Board’s decision will be given at the April Interim Committee meeting. By deciding in favor of the U.S. proposal, the Board has agreed that the Fund will work with the Bank and the individual member country in jointly developing the Policy Framework Papers, which will cover a wide range of macroeconomic and structural areas, and guide the development of growth-oriented loan programs by each institution. Acceptance of the Policy Framework marks a major step forward in Fund/Bank collaboration, and has far-reaching implications for the way in which the Fund conducts its business. It will be the first time that the Fund and the Bank have fielded joint missions to member countries on a regular basis. These procedures should enhance the prospects that the Fund and the Bank will provide consistent, complementary advice that can assist countries in tackling their economic problems and establishing growth.

During the course of the Board discussion, many Directors expressed their governments’ appreciation for the U.S. initiative, and for the leadership the U.S. has provided in supporting growth and more effective lending programs in the poorest countries, particularly Sub-Saharan Africa.

As you know, many people in Treasury, my office at the Fund, the U.S.E.D.’s office at the Bank, State and AID have put forth considerable effort in bringing this proposal to fruition. In particular, I would like to call to your attention the role that Mary Bush, my Alternate, has played in helping to formulate the modified proposal and to gain its acceptance in the international community.

Letters of appreciation from you to Secretary Shultz and Peter McPherson are being prepared to recognize the roles that they and their staffs have played in support of this effort.

1. Source: National Archives, RG 56, Records of the Office of the Secretary of the Treasury, Correspondence Files, 1986, UD–13W, 56–89–13, Box 31, [no folder title]. No classification marking. A copy was sent to Darman.
2. A copy of the Chairman of the World Bank’s summary of the discussion of the Trust Fund Proposal at the Executive Directors’ meeting, which took place March 17–18, is in the Reagan Library, Stephen Farrar Files, 1986–1987 File, Subject File, Debt—Baker Plan 1985–1986; NLR–177–1B–1–2–9.