Office of the Historian

314. Memorandum for the Files1

Washington, June 28, 1984

SUBJECT

  • State/Treasury Lunch, June 28

[Omitted here is discussion unrelated to IMF/IBRD relations.]

5. IMF/IBRD Relations. Since the Summit declared that there should be improved cooperation between the World Bank and the IMF,2 the question was raised as to how this might be brought about. Sprinkel and Mulford said that they would object strongly to general development grants being made by the World Bank, and that the grants should be project-oriented. McCormack pointed out that many world bank projects are, at the very best, useless, and Sprinkel and Mulford both agreed. Wallis then asked how the Treasury felt about the African economic initiative and, since the Treasury people seemed to know little if anything about it, described it as a plan to provide money to help countries shift to sound market-oriented policies. He then cited as an example of the kind of thing that might be done the dilemma of the President-elect of Ecuador. Ecuador subsidizes gasoline so that it sells at thirty-five cents per gallon. Doubling the price would eliminate the government deficit, and tripling would be required to attain a market price. If the President does not act promptly after his Inauguration, probably he will not be able to act at all, or at least not go far enough. If he immediately doubles the price of gasoline, quite apart from organized political dissent, there will be numerous cases of genuine hardship. If funds were available, they could smooth over the hardship and facilitate adjustment to the new price. Sprinkel and Mulford agreed that this would be a good use of World Bank funds. In general, the upshot of this discussion seemed to indicate agreement between State and Treasury.

Allen Wallis3
  1. Source: 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: Memoranda for the Files, 1983–1986. Confidential.↩
  2. The London Economic Summit took place June 7–9. Documentation on the Summit is in the International Debt compilation of this volume.↩
  3. Wallis initialed “AW” above his typed signature.↩