840.50 UNRRA/10–2946

Memorandum by the Director of the Office of Financial and Development Policy ( Ness ) to the Under Secretary of State for Economic Affairs ( Clayton )

Subject: Post-UNRRA Relief Needs2

1. Total Need. The total need for relief financing in 1947 is estimated to be $672 million, distributed as follows (see the appended Tables I and II):

($ millions)
Austria 142
Hungary 84
Italy 234
Poland 142
Yugoslavia  70
Total 672

By “need for relief financing” is meant the balance of minimum import requirements (including food, consumers’ goods and essential rehabilitation items but excluding reconstruction or development) beyond what can be paid from current earnings, present exchange holdings or credits other than those specified below. On this basis it appears that Greece, Czechoslovakia and China will in 1947 have sufficient resources to finance their minimum import requirements over the year as a whole, although Greece may experience deficiencies in the first months of the year. No attempt is here made to consider the needs of the Byelo-Russian and Ukranian Republics, which cannot be treated apart from the Soviet Union as a whole. Albania is excluded by reason of lack of information.

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In deriving the above figures it has been assumed that the following Eximbank and International Bank credits3 will be available to finance purchases in 1947 within the category of “minimum import requirements,” chiefly rehabilitation items:

($ millions)
Eximbank World Bank
Austria 25
Italy 100 100
Poland 50
Yugoslavia 25
Total 125 175

These figures may, so far at least as the World Bank is concerned, err on the side of over-estimate. If even these limited loans cannot be made the need for relief financing will be correspondingly increased.

2. Participation in Financing. It appears likely that the British and’ Canadians will be willing to make some contribution to financing these relief needs. The British have indicated willingness to advance $40 million for Austria. The Canadians have thus far mentioned no figures. If the U.S., U.K., and Canada were to share financing in the proportions to which they have contributed to UNRRA, the above total of $672 million would be distributed as follows: U.S., $490 million; U.K., $140 million; Canada, $42 million. It is also possible that the USSR may be willing to make relief supplies or funds available to some of the countries. As indicated in Mr. Wood’s memorandum,4 the Department will consult with these countries and others on this question.

3. Recommendations.

a.
I would recommend that any 1947 relief funds made available by the United States be advanced in the form of a grant rather than of a loan or credit. Since the commodities to be financed by 1947 relief grants for the most part are not of a “self-liquidating” nature, the loan form appears in general to be inappropriate. In the derivation of the country-by-country figures, moreover, loan-financing of the rehabilitation elements in minimum import requirements has been included to the maximum amount thought possible. Furthermore, the magnitude of the service burden which these countries-will have to-bear as a result of reconstruction credits already made or to be received over the next few years makes additional service charges undesirable and would affect adversely ability to repay Eximbank and World Bank credits.
b.
I would also recommend that a United States relief grant should not be limited to purchases in the United States, primarily because of limited availability of some supplies, particularly food, here.5
  1. Participating governments were scheduled to end their financial support of UNRRA on December 31, 1946, though deliveries were projected for Europe until March 31, 1947, and for the Far East until June 30, 1947.
  2. For documentation regarding Export-Import Bank and International Bank credits, see Foreign Relations. 1946, vol. i, pp. 1391 ff.
  3. C. Tyler Wood, Special Assistant to the Assistant Secretary of State for Economic “Affairs (Thorp). Memorandum not found in Department files.
  4. Export-Import Bank credits were extended in the form of “tied loans”, which is to say that purchases made by the borrower under the credit had to be made-in the United States.