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

302. Memorandum From Secretary of the Treasury Regan to President Reagan¹

Washington, November 30, 1983

SUBJECT

• Approval of U.S. Funding for IDA VII

The International Development Association (IDA) is the World Bank affiliate which makes highly concessional loans (long-term and low interest, often referred to as “soft-loans”) to the world’s poorest countries. Negotiations among the member countries for a seventh replenishment of IDA (IDA VII) are now at a decisive stage, and considerable international attention is focused on the amount of the U.S. participation in the replenishment. You will recall that we inherited a very generous IDA VI commitment from the previous Administration of $3.24 billion over a three-year period, or $1.08 billion per year. We couldn’t get that amount through Congress but did get an average of $772.5 million per year in FY 81–84. We still owe $150 million for FY 84.

Since December 1981, our budget has included $750 million as the annual U.S. contribution to IDA VII. We have told IDA members that $750 million annually is the maximum to be expected from the United States, and many donors and recipients are still vigorously pressing for a larger U.S. contribution. Your fellow heads of government at Williamsburg pressed you to be generous on IDA VII,² hinting at a contribution at least equal to the last two years ($945 million per year) and hopefully as much as $1 billion per year. Tom Clausen has also talked to you along the same lines. Various other heads of government have mentioned this to you as they met with you in bilateral sessions here in Washington.

The U.S. position on IDA VII was reviewed by the SIG/IEP on November 23.³ Although the State Department and George Shultz personally favor a somewhat higher level,⁴ the strong consensus of the SIG was that annual IDA contributions should not exceed $750 million. There are two key reasons for the $750 million limit:

(1) Such a funding level could, if efficiently managed, meet the needs of the poorest and least creditworthy IDA recipients, particularly Sub-Saharan Africa. This level would also quicken the pace of India’s “maturation” to other World Bank lending programs on “harder” or more near-market terms. It would also minimize the increase in IDA funding for the PRC who will be eligible for IDA VII money. While both countries have low per capita incomes, China in particular is very creditworthy and can get access to other sources of finance.

(2) We believe a majority of Congress would not enact an increase above $750 million. We want to avoid the funding uncertainties associated with IDA VI when the Carter Administration failed to take Congressional views into account. Obtaining Congressional approval of even a $750 million annual contribution will require a major Administration effort. You will recall our recent efforts in behalf of another international institution, the IMF quota increase which squeaked by on the last day of the recent session.⁵

IDA VII negotiations resume on December 9 in Paris. If you approve of $750 million per year, we will re-emphasize this longstanding U.S. position. We believe this represents a realistic but compassionate level of multilateral foreign aid. It is important that our negotiating partners recognize that this is unequivocally our final position. This amount from us will be a big disappointment to many industrialized nations, as well as the less developed countries. It means an overall increase of approximately $9 billion for IDA over the next three years versus their hopes of $16 billion ($1.33 billion per year from us) and their expectations of compromise at $12 billion ($1.0 billion a year from us). However, we are (hopefully) going to suggest budget stringency in our FY 1985 figures. This will require domestic spending cuts particularly in social programs. It would be hard to justify an increase in multilateral bank funding. On behalf of the SIG/IEP, I request that you approve that annual U.S. contributions to IDA VII not exceed $750 million.⁶

Donald T. Regan⁷
Chairman of the SIG/IEP

1. Source: Reagan Library, Roger Robinson Files, Chronological File, Robinson Chron 1983; NLR–487–10–11–14–3. Secret.
2. See footnote 4, Document 300.
3. See Document 301.
4. See footnote 2, Document 301.
5. Congress passed the IMF quota/GAB increase on November 18. According to a November 28 memorandum from McCormack to Shultz, the legislation was a “major step forward,” but “certain amendments to the bill may give us political trouble and the IMF financial constraint will remain tight.” (Department of State, Files of the Under Secretary of State for Economic Affairs, W. Allen Wallis, Chrons; Memo to the Secretary/Staff and Departmental/Other Agencies; Memos to the Files; White House Correspondence, 1987–1987, Lot 89D378: Chron File—November 1983)
6. Reagan initialed and placed a checkmark next to the “Approve” option.
7. Regan signed “Don” above his typed signature.