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

266. Minutes of a Cabinet Council on Economic Affairs Meeting¹

Washington, September 23, 1981, 8:45 a.m.

ATTENDEES:

• Messrs. Regan, Block, Weidenbaum, Anderson, Porter, Wright, Sprinkel, McPherson, Hormats, Leland, Kudlow, Schneider, Bailey, Denoon, Hopkins, Evered, Garrett, Gribbin, Naylor, Rosenthal, Waldman, and Cribb, Ms. Connor, Ms. McLaughlin, and Ms. Moore

[Omitted here is discussion of federal credit policy.]

2. Assessment of Multilateral Development Banks

The Council reviewed a study prepared by the Department of the Treasury in coordination with several other departments and agencies, on the policies and operations of the multilateral development banks (MDBs) to help provide the basis for a policy and budgetary framework for U.S. participation in these institutions in the 1980s.²

Mr. Sprinkel’s presentation focused on the principal findings of the study. He noted that to date MDB performance has been mixed: economic rates of return have been relatively high (15–20 percent) suggesting a positive contribution to development; a fairly high percentage of recent loans have had economic or financial problems, many due to insufficient MDB leverage on LDC policy reform; however, U.S. influence in the MDBs has been strong and has almost always prevailed on significant matters.

He observed that the study concluded that the MDB goals to integrate the LDCs into the international economic system should be consistent with four administration maxims: adherence to free and open markets; emphasis on the private sector as a vehicle for growth; minimal government involvement; and assistance to the needy who are willing to help themselves.

He outlined the key preliminary recommendations of the study: more emphasis on using MDB funds as catalysts for private investment and for promoting private sector development in the LDCs; increasing the focus of “soft window” lending on the poorest LDCs while pursuing more selectivity in MDB lending geared to appropriate economic and financial policies; and pursuing effective graduation policies for users of capital window funds.

The discussion focused on the unresolved budget issues, how fast countries can mature from concessional lending, the advisability of deferring final decisions on MDB issues until after Cancun,³ and the relationship of aid to economic growth.

The Council agreed to continue discussion of this subject at its meeting on Thursday morning, September 24.⁴

1. Source: Reagan Library, Richard Darman Files, Cabinet Council on Economic Affairs 09/08/81–09/24/1981, Case File 018936. No classification marking. The meeting took place in the Roosevelt Room at the White House. No drafting information appears on the minutes.
2. A summary of the study, which was forwarded to the Cabinet Council on Economic Affairs on September 21 under a covering memorandum from Porter, is in the Reagan Library, Richard Darman Files, Cabinet Council on Economic Affairs 09/23/1981, Case File 01895D.
3. For documentation on the 1981 Cancun Summit, see the Global Negotiations compilation of this volume.
4. See Document 267.