We have drawn up and have commenced initiation of the attached nine-point
action plan for mobilizing broad international economic assistance for
Zaire. This plan is adapted largely from an excellent memorandum
prepared by AF and EB. I have also added several specifics, including measures
to increase copper and agricultural production.
The action plan fixes responsibilities for each step. I am asking
Schaufele to assume overall management responsibility, in consultation
with E, T, EB and AID, with Bill Rogers to arrange for periodic reviews of
progress and problems.
Attachment
Action Plan
Washington,
undated
ACTION PLAN: International Aid to
Zaire
Objective
To organize a coordinated international effort to overcome Zaire’s
critical foreign exchange deficit, to establish the basis for early
resumption of medium and long term development, to increase
assistance from multilateral agencies and national aid donors, to
maximize Zairian self-help, to encourage private financial
institutions to restore both short and longer term credits to Zaire,
and to lay the groundwork for a later request to Congress for a
possible supplemental authorization.
Background/Analysis
The rationale for the separate and interrelated actions outlined
below is contained in an AF-EB briefing memorandum of June 11 on
“Dealing with Zaire’s Financial Problems.”
Since preparation of that memorandum, the Paris Club has concluded
its meeting with an ad referendum agreement outlining the terms fora
rescheduling program. The US was alone in entering a reservation
regarding the plan to reschedule interest payments for 1977 until we
are able to reexamine Zaire’s economic prospects in the fall. We
also continue to have doubts about Zaire’s ability to meet the
obligations it will assume under this agreement without the input of
additional resources by the donor states. The Paris Club did not,
unfortunately, make a serious effort to identify the magnitude of
the balance of payments (B/P) gap.
Two points not covered in the earlier memorandum concern the ability
of Zaire to maximize its long-term developmental potential in the
lagging mineral and agricultural production fields. Copper remains
the key to Zaire’s developmental plans. Failure to arrest the
decline in copper production would render useless all other economic
assistance to Zaire. The immediate reasons why production may fall
well short of 400,000 MT this year (compared to an original IMF assumption of 500,000 MT) are
easily identifiable: shortage of or failure to allocate required
foreign exchange to import essential equipment and supplies (coal,
fuel, chemicals, etc.), and transport bottlenecks. A collective
[Page 3]
approach could help
overcome these bottlenecks but might also identify other ways in
which the copper industry could increase efficiency to take fuller
advantage of any increase in the price of copper. Both an immediate
transfusion of cash and medium term investment measures are
required.
The following actions, listed in rough sequence, represent a
refinement of the program outlined in the June 11 memorandum of
AF and BB. They are designed to
meet Zaire’s immediate B/P problems
and its longer-term developmental needs.
Action Sequence and Responsibility:
1. USG
Recommendations to Mobutu: Instruct Ambassador Cutler to outline to Mobutu and others of the GOZ this action plan (outlined below),
our appraisal of the economic situation Zaire faces as brought out
in the Paris Club meeting, and our willingness to encourage other
countries to help fill the resource gap if the Government of Zaire
improves its own economic performance. Specifically, Ambassador
Cutler will urge President
Mobutu to:
- (a)
- ask the IMF to work with
the GOZ in reformulating the
stabilization program to take into account the substantial
deterioration in the B/F outlook, and
- (b)
- request that the IBRD
constitute the Consultative Group on aid to Zaire to deal
with both immediate financial assistance and long-term
development measures.
ACTION: AF with
Embassy
2. Paris Club Rescheduling: Use the
creditor club to develop a better awareness on the part of both
creditors and GOZ of the depth of
Zaire’s B/P problem and to coordinate
economic performance criteria established under the rescheduling
agreement with those under a revised IMF standby.
ACTION: EB/AF
3. USG
Consultations with IMF:
Assure to the maximum extent possible that IMF and USG appraisals
[Page 4]
of Zaire’s economic
situation are consistent; encourage IMF to be responsive to a GOZ request thatanew stabilization agreement be
negotiated, permitting it to draw both the first and second
tranches, within the context of stricter performance criteria.
ACTION: AF,
EB and Embassy
4. USG
consultations with IBRD:
Deputy Secretary Robinson
will urge McNamara to: (a)
respond favorably to an anticipated request from the GOZ to reconstitute the Consultative
Group; (b) include short-term B/P aid
in the fund-raising functions of the Consultative Group; (c) begin
work promptly with the IMF and
GOZ on an assessment of Zaire’s
1976–77 B/P deficit, as a basis for
budgetary/parliamentary actions by donor countries and supplemental
aid budget action by the USG; and
(d) assist in longterm development planning (see 5 below).
Department officials will follow up with IBRD at the working level.
ACTION: Deputy Secretary, AF and AID
5. Joint Emergency Measures to Restore Copper
Production: Urge GOZ and
IMF to agree to earmark all or
substantial part of the pending first tranche ($50 million) of the
IMF standby credit to meet
Gecamines immediate foreign exchange requirements. Simultaneously,
assist the GOZ in employing an
international group of mining consultants to make urgent
recommendations on technical and financial measures to raise copper
production and exports. Additional, medium-term financing might be
raised by the sale of copper bonds guaranteed against political risk
by OPIC and similar national
insurance agencies acting in tandem. (The latter approach would
require consultation with existing international creditors who look
to Zaire’s copper earnings as the basis of their credit
security.)
ACTION: AF with
Embassy and IMF
6. Focus on Long-Term Development
Priorities: In consultation with IBRD and GOZ, stimulate
action by IBRD staff to prepare an
agenda and analytical papers for consideration and action at one of
the first of the Consultative Group meetings, with concentration on
two key factors:
[Page 5]
- (a)
- maximizing Zairian mineral production and exports.
- (b)
- reducing bottlenecks to early expansion of agricultural and
domestic marketing through an integrated reform program derived
from existing and additional expert analysis (e.g. AID-funded agricultural sector
survey).
ACTION: AID with
AF
7. USG Bilateral
Consultation with Donor Countries: Through use of an
emissary and Embassy approaches to host governments, make the case
for expanded assistance to Zaire and the need for better Zairian
performance in Ottawa, Brussels, Paris, London, Bonn, Tokyo, Jidda,
Abu Dhabi, The Hague, Rome and Kuwait. We should take the
opportunity to explain our views on the need for better coordination
on longer term development assistance, specifically:
—implementation of a major USG
planned agricultural sector survey.
—major infrastructure needs.
ACTION: AF
8. USG Promotion
of AID to Zaire in Multilateral
Meetings: Incorporate talking points for use by the
Secretary in papers being prepared for the OECD Ministerial meetings, the Puerto Rico Summit
Conference and subsequent gatherings of major country foreign and
finance ministers.
ACTION: AF with
EUR, C
9. Military Aid: Quite apart from the
international economic program, we should follow up the Secretary’s
discussions in the security field by examining with the GOZ and very discreetly with selected
European governments the possibility of coordinating a multilateral
military assistance program for Zaire to supplement our bilateral
efforts.
ACTION: AF,
PM
