860h.51/354
The Minister in the Kingdom of the Serbs, Croats and Slovenes (Dodge) to the Secretary of State
[Received March 9.]
Sir: In my Despatch No. 1588 of September 26th last,74 I had the honor to report upon certain credits contained in the Yugoslav Budget Law for the present fiscal year and particularly upon credits therein provided for the payment of one year’s interest upon the advances of $25,000,000 and $15,000,000 respectively made by the Government of the United States to the Serbian Government. I observed that notwithstanding these credits, I had been unable to find any credit provided for the payment of interest on the $12,000,000 advance made by the Government of the United States to the Serbian Government and I stated that for my information as to the reason for this I had addressed an informal inquiry to the then Minister of Finance, Dr. Kumanudi.
In Mr. Boal’s Despatch No. 1351 of May 11th last,75 he reported that, in accordance with the Department’s Circular telegram dated April 21, 12 noon,76 he had communicated to the Yugoslav Government the ratification of a Resolution adopted by the World War Foreign Debt Commission on April 18th last and had informed this Government that this Commission desired to receive any proposals or representations which the Yugoslav Government might wish to make for the settlement or refunding of its obligations under the [Page 178] provisions of the Act of Congress approved February 9th 1922. Having received no reply to Mr. Boal’s communication, I addressed on October 3rd last an informal letter to Mr. Gavrilovitch, Assistant Minister for Foreign Affairs, inviting his attention to this fact and requesting that a reply might be sent to me.
As I received no replies to either of my letters mentioned in the foregoing paragraphs, I invited Mr. Gavrilovitch’s attention to them on several occasions and I was finally led to the opinion, corroborated by Mr. Gavrilovitch, that Dr. Kumanudi had no intention of replying to either of them. On the coming into office of the new Minister of Finance, Dr. Stojadinovitch, I invited his attention to my two letters in the course of a conversation and he requested me to send him copies of them, assuring me that they would have his immediate attention. Having done so I finally received on the 10th instant a letter dated the 7th instant, from Mr. Gavrilovitch in which he communicated to me the reply to both of my letters of the Minister of Finance. I enclose a copy and translation of this reply,78 which will be observed to state that no credit for the payment of interest on the $12,000,000 advance appears in the Budget Law because this advance was a war loan and it did not appear to be desirable that such loans should appear in the Budget as no definitive decision had yet been taken in regard to them and as interest on them was not effectually paid. The letter further states that interest credits on the $25,000,000 and $15,000,000 advances were entered in the Budget because these advances had been concluded after the Armistice but it expresses the opinion that these credits should also not have been entered as these two advances in reality belonged to the same category of war loans. The letter adds however that the foregoing is without prejudice to any decisions which may be taken with regard to the question of Inter-Allied war debts which must be treated and resolved separately.
It will be observed that the letter then states that due note has been taken of my communication to the effect that the $12,000,000 advance bears interest. This is in reply to the Legation’s Note to this effect written in accordance with the Department’s Instruction No. 296 of March 30th last (File No. 860h.51–131)78 and in view of Dr. Kumanudi’s contrary opinion on this matter.
Finally the letter refers to my request for a reply to Mr. Boal’s Note communicating the Department’s circular telegram of April 21, 12 noon, referred to in the second paragraph of this Despatch, and states that this matter will be studied at once by the Minister of Finance, of whose decision I will be informed.
[Page 179]Subsequently in conversation, Dr. Stojadinovitch has substantially repeated to me the contents of this letter and regarding the reply to Mr. Boal’s Note has stated that this matter was one of considerable difficulty and required more consideration. He intimated that as the Yugoslav Government’s finances stood at present, any interest payments would practically be impossible, but he intended, as already reported, to raise the taxation of the peasants in his Budget for the next fiscal year which he would present to the new Parliament which is to meet about April 18th. In regard to this plan, however it should be noted that it depends upon whether Dr. Stojadinovitch then remains in office which itself depends upon a Radical victory. It may nevertheless be said that practically any Cabinet which may come into power after the elections, will sooner or later find itself obliged to raise peasant taxation which without any undue hardship should increase the Government revenues very substantially. At present, as also reported, the taxation of the peasants, who form 85 percent of the population, is almost nil.
In this connection, and referring to my Despatch No. 1682 of November 13th last,79 page 2, I may report that Dr. Stojadinovitch informed me in conversation a few days ago that as the amount of the Serbian war debt to France, amounting to about one billion gold Francs, had now practically been determined, he was about to send to the French Minister here a form of bond which he would be willing to sign in order thus to fund the Government’s war debt to France. It will be remembered that the Government owes no postwar debt to France. As to the war and post war debts to England, Dr. Stojadinovitch stated that there was still too great a difference between the amount claimed by that country and the amount which his Government had ascertained to be due to allow of the funding of this debt at present by signing any bonds. The British war debt he estimated also at about one billion gold Francs and the post war debt at approximately 2,000,000 pounds Sterling. From Dr. Stojadinovitch’s statements I understand that the difficulty in determining the amount of the British debt is still chiefly the old one involving the amount and cost of various military supplies received from the British authorities at Salonica. Dr. Stojadinovitch gave me to understand however that the giving of bonds whether to France or to England involved no question of paying interest on them, which was left for subsequent discussion.
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I have [etc.]