860h.51/192: Telegram

The Minister in the Kingdom of the Serbs, Croats and Slovenes ( Dodge ) to the Secretary of State

28. My 28 [27], [June] 5th.

Following additional statement just received from Finance Minister is telegraphed textually and clear at request Sheldon for Department’s information and transmission to Blair & Co., New York:

“Of the $100,000,000 of the loan, $30,000,000 are reserved for the general needs of the kingdom, $70,000,000 for the construction of a railroad from Belgrade to the Adriatic and of a terminal port and for their equipment. The proceeds of the first issue of $25,000,000 are destined for purposes directly or indirectly productive, indispensable to the economic reconstruction of country. (A) $10,000,000 par value are destined for the construction of the Adriatic railway and its port. (B) $15,000,000 par value are destined for general needs; especially, $1,300,000 par value to reimburse the Standard Oil Co., $10,000,000 approximately for rehabilitation of existing railways and their equipment, for railway and bridge construction and for the construction of Government buildings rendered necessary by increase in size of country, and for purchase of raw materials. Balance to repay in part advances by National Bank and to provide fund for stabilization of the dinar. (It is to be noted that amount of bank notes which National Bank may issue is expressly limited by law of February 1st, 1920.)

No part of the money provided by sale of first issue of $25,000,000 shall serve to reimburse any debt whatsoever contracted previously by kingdom outside of United States of America.

It should be noted that there do not exist in Belgrade Government buildings to house ministries and other public service; houses which hardly sufficed for needs of prewar Serbia with a population of 3,000,000 have become absolutely insufficient for kingdom of 13,000,000 people. Furthermore all public services are actually installed in private buildings separated one from other and coordination of services cannot be secured.

On other hand there is urgent need that these private buildings should be returned to their proper uses. Construction of adequate Government buildings therefore is absolutely necessary to insure good administration both from point of view of management and [Page 1015] finance. The interest charge on part of loan employed in these constructions furthermore will be less than amount of rent actually paid for occupation of private buildings”.

Sheldon states Finance Minister will take no steps to submit loan contract to Parliament until Department’s consent to loan received.