371. Memorandum From Secretary of State Shultz to President Reagan1
SUBJECT
- Presidential Certification Required to Authorize Payments to Multilateral Development Banks and International Organizations and Programs
ESSENTIAL FACTORS
Section 560 of the FY 1987 Continuing Resolution prevents use of appropriated funds to finance “indirectly” any assistance to Angola, Cambodia, Cuba, Iraq, Vietnam, South Yemen, Libya or Syria unless you certify that withholding such funds is contrary to the national interest. This provision is basically political in nature but would seriously interfere with U.S. involvement in and support of multilateral development banks (MDBs). None of the MDBs has lent to Cambodia, Iraq, Libya or Vietnam in recent years; Cuba is not even a member. Lending to the others—Angola, South Yemen and Syria—over the last five years has only amounted to a quarter of one percent of total MDB lending, and only modest levels of lending are likely in the future.
Moreover, the provision also applies to U.S. voluntary contributions to international organizations and programs (the IO and P account) which provide assistance to the listed countries. During FY 1987, this [Page 908] account will fund such UN-supported (and Congressionally-earmarked) programs as the UNDP, UNICEF, IFAD, WMO, and the IAEA which include the listed countries among the recipients of their assistance programs. Although exact amounts of such indirect assistance are not available, the total for FY 1987 could be significant. For example, UNDP has made a tentative allocation of $2.2 million for Cuba in 1987.
The implementation of this provision will do serious harm. Absent the presidential waiver authorized by the provision, we can contribute to these institutions only by “earmarking” funds such that they could not be used for the listed countries. The MDBs and various international organizations and programs, however, have determined that acceptance of contributions containing any “earmarking” provisions is contrary to their charters and that they could not accept them. The interested USG agencies concur with this view.
The limitation thus effectively prevents timely payments to the MDBs under arrangements which we negotiated in good faith with our allies after close consultations with the Congress. Failure to make payment could lead to reduced payments by others concerned about equitable burden-sharing, and sharp reductions in the lending programs of those institutions. The credit markets, which lend the MDBs upwards of $90 billion, would perceive a failure to make payments as a withdrawal of USG support for the institutions; MDB credit standing would be severely affected. The financial viability of the MDBs, thus, would be in jeopardy. Their role in the debt strategy would be severely curtailed.
The limitation is thus contrary to our national interests. It would undermine the MDBs and particularly their lending programs, which could exceed $23 billion a year at an annualized budgetary cost to the USG of $1.4 billion.
The impact on the IO and P account would be similarly detrimental. The limitation would undermine IO and P-financed programs in excess of $2 billion which cost the USG less than $250 million annually. They focus to a large extent on such humanitarian activities as immunization of children and famine relief as well as on the IAEA nuclear safeguards program.
These programs overwhelmingly assist countries we believe are important to the conduct of our foreign policy, and which (in many cases) receive little or no bilateral assistance. It is clearly unsound policy, and contrary to the national interest, to hold those programs hostage to the less than $50 million annually provided the countries specifically mentioned in the new provision.
RECOMMENDATION
That you certify that withholding funds to multilateral development banks and other international organizations and programs pursuant to the limitation in Section 560 of the FY 1987 Continuing Resolution [Page 909] is contrary to the national interest.2 (A draft certification is attached at Tab 1;3 attached at Tab 2 is the Justification which we will provide to Congress in support of this certification.)4
- Source: Reagan Library, Stephen Danzansky Files, International Trade Subject Outline, VIII (A) Debt—World Bank. No classification marking.↩
- Reagan did not approve or disapprove the recommendation. In a December 11 memorandum to Shultz, Reagan transmitted Presidential Determination No. 87–4, which states: “Pursuant to Section 560 of the Foreign Assistance and Related Programs Appropriations Act, 1987, (as enacted in Public Law 99–500), I hereby certify that the withholding of funds to multilateral development banks and other international organizations and programs pursuant to the limitation contained therein, prohibiting the obligation of funds appropriated by the Act to finance indirectly any assistance or reparations to certain specified countries, is contrary to the national interest.” (Ibid.)↩
- Attached but not printed.↩
- Attached but not printed.↩