303. Memorandum From Secretary of State Shultz to President Reagan1
SUBJECT
- U.S. Contribution to Replenishment of World Bank/IDA
I want to raise with you the critical issue of U.S. support for the World Bank/IDA, which Don Regan has posed in somewhat different terms.2
The Congress remains divided on the level of U.S. contributions to IDA, as on many issues. Some oppose any contribution over $750 million annually and favor putting any extra dollar of US aid into security assistance; others see larger U.S. contributions for IDA as the test of whether the U.S. is tending to long-term stability and growth in the Third World as well as putting out today’s fires. On this issue, therefore, as on so many others, the Administration has to lead the way by defining clearly what is the fundamental U.S. interest. If we lead the Congress will respond. By appropriating $945 million for IDA in each of the last two fiscal years the Congress has shown that we are not constrained to lower levels if we see the U.S. interest otherwise.
All other donors are willing to support a three-year replenishment of $4 billion annually, which means a yearly U.S. contribution of $1 billion—or $950 million if we can lower our share this much (which appears possible). If we at this point take a final U.S. position below $950 million, every one’s potential contribution is going to come down with ours and we will be the spoiler—for our allies and the Third World. At any U.S. contribution below $900 million annually the political repercussions from a U.S. spoiler role will be so serious as to prejudice our lead role in influencing what the World Bank does with all its resources.
After we have fought so hard for $8.4 billion to support financial stability in the LDCs through the IMF it would be pound foolish and contradictory to cut down significantly the World Bank’s potential contribution to the parallel mission of reviving LDC growth—for failure to increase our support by $150–$200 million annually. Given the limited instruments we have to project U.S. influence in the Third World it is equally unwise to let U.S. influence in the World Bank slide. The World Bank is the major external financer of the poorest LDCs and thus [Page 752] the major external influence on their economic policy. The Bank was our creation and is one of the most effective instruments we have for supporting our kind of open economic system and broad-based society in the LDCs. Time and again, as in our current plans for Africa, we come back to the conclusion that World Bank leadership is essential to address our clients’ dire economic problems.
We need a strong World Bank and should not give up any U.S. leverage over its vital role. These requirements just don’t square with a U.S. contribution to IDA’s replenishment less than $900–$950 million annually. It would be a mistake to request a lower figure in the FY 1985 budget.
- Source: Reagan Library, Roger Robinson Files, Chronological File, Robinson Chron 1983; NLR–487–10–11–5–3. Confidential. A stamped notation at the top of the memorandum reads: “83 Dec 2 A 2:35 White House Situation Room.”↩
- See Document 302.↩