Office of the Historian

260. Memorandum From the Acting Assistant Secretary of the Treasury for International Affairs (Nachmanoff) to Secretary of the Treasury Regan1

Washington, February 11, 1981

SUBJECT

  • Reaction to Proposed Cuts in Foreign Assistance

In addition to the oral messages you have received, the written response to OMB proposals to cut foreign assistance programs, in particular a reduced share in the upcoming International Development Association (IDA) replenishment, so far consists of seven personal messages to you, from David Rockefeller, the Finance Ministers of Japan, Germany, Mexico and India, the President of the Inter-American Development Bank, and the Executive Director of Bread for the World.2 We have also received 29 demarches through diplomatic channels (list attached)3 and a letter to Secretary Haig from Representative Conte.

All of the comments are strongly critical of the OMB proposals. Most developed countries stress the international nature of our commitment to the IDA replenishment. The message is that all countries are [Page 660] facing budgetary pressures similar to those in the U.S. and that everyone else is finding means to honor the pledge. Japan, Germany and Norway point to their own advance contributions to help IDA bridge the gap until the full replenishment becomes effective. Japan warns it might also face domestic political problems if the U.S. reduces its contribution because the Diet has already approved Japanese funding.

Other developed country concerns include the impact of an IDA cut on the general North/South dialogue as well as on other international negotiations. A separate cable from Japan raised the possibility that some countries, such as France, will question whether the U.S. should be allowed to retain its current IMF/IBRD share and voting rights if it is unwilling to bear an equitable share of the IDA replenishment. The Japanese suggest that, if the U.S. cuts its share, it should ask other countries to reduce their shares proportionately.

Less developed countries emphasize their dire economic predicament and the harm they will suffer if foreign aid is reduced. Fears are expressed about the future of the U.N. Economic Program and the regional development banks as well as IDA. Several countries mention their political moderation and support of Western ideals, even in the face of Soviet destabilization efforts. Finally, Madagascar and Rwanda pointedly remind us that they voted against PLO observer status at the IMF/IBRD annual meeting last fall,4 on the understanding that the U.S. would not otherwise participate in the IDA replenishment. The Ivory Coast says it will have no choice but to support increased Saudi Arabian participation in the IMF, possibly an indirect reference to the PLO issue.

  1. Source: National Archives, RG 56, Records of the Office of the Secretary of the Treasury, Official Files, 1981, UD–10D27, 56–83–71, Box 35, Memo to the Secretary Classified February 81. Limited Official Use. Sent through Sprinkel, who did not initial the memorandum.↩
  2. Correspondence not found.↩
  3. The undated list, entitled “Countries Criticizing OMB Proposals to Cut Foreign Aid,” is attached but not printed.↩
  4. See Foreign Relations, 1977–1980, vol. III, Foreign Economic Policy, Document 250, footnote 3.↩