The Acting Secretary of State to the Pakistani Ambassador (Ispahani)

The Acting Secretary of State presents his compliments to His Excellency the Ambassador of Pakistan and has the honor to refer to [Page 173] the Embassy’s note of November 28, 19471 asking whether this Government would be prepared to receive a financial mission from the Government of Pakistan to continue negotiations on the subject of a dollar loan; and to a note of the same date1 addressed by the Chargé d’Affaires ad interim of Pakistan to the Acting Secretary of State with specific regard to a loan for the relief and rehabilitation of refugees who have entered Pakistan in a destitute condition from India.

As Mr. Laik Ali2 was verbally informed by officers of the Department some weeks ago, the memoranda submitted by him in connection with proposed economic reconstruction and development projects in Pakistan appear to reflect a program which will require implementation over a period of years as foreign capital and technical assistance can be obtained, technical and managerial personnel can be trained, and adequate credits can be secured. He was also informed that this Government is not authorized to extend foreign credits for a comprehensive program of this magnitude without prior Congressional approval and appropriation. Since the Department is not prepared, at this time, to recommend such Congressional action, it was suggested to Mr. Laik Ali that the Government of Pakistan break down the comprehensive program envisaged in his memoranda into selected projects which might qualify for financing by the Export-Import Bank or ultimately by the International Bank. To assist in reviewing the projects eligible for such financing and to make clear the procedures to be followed, there is attached hereto a statement of principles governing the operations of the Export-Import Bank.1

In view of the limited availability of public funds, the possibility of drawing upon private funds to meet a part of Pakistan’s capital needs should not be overlooked. It is the understanding of the Department that representatives of the Government of Pakistan have already taken preliminary steps in this direction. The growing restoration of order in Pakistan, and the continued improvement of economic and political relations between Pakistan and neighboring countries will, no doubt, encourage such private investment.

The Department would, of course, welcome a visit to this country at any time by the Finance Minister of Pakistan, but it would appear that the most advantageous step that could be taken now would be the submission of a fully documented application by the Government of Pakistan for credits to finance one or more specific projects by the Export-Import Bank in terms of the statement of principles transmitted herewith. Such an application should be sent directly to the Bank [Page 174] through the Embassy of Pakistan at Washington. An opportune time for high officials of your Government to be present in Washington would be during the period when the Bank has such an application under consideration.

With respect to the problem of relief and rehabilitation of refugees in Pakistan, it is noted that the Embassy of Pakistan has already taken steps to obtain some assistance from the War Assets Administration. This Government is fully aware of the grievous hardships that have been imposed upon millions of persons as a result of recent disturbances in Pakistan and India and is deeply sympathetic with the efforts that are being made for the relief and rehabilitation of these destitute groups. The full support of the Department will be given to the efforts which the Embassy of Pakistan is making to obtain assistance from the War Assets Administration. There is, however, no other channel through which additional relief supplies may be obtained except through volunteer American relief agencies. In this connection the attention of the Embassy is called to the efforts now being made by the Committee for Emergency Aid to Pakistan and India, which has its headquarters in care of Church World Service, Inc., 37 E. 36th Street, New York, New York. The Department is in close touch with this organization and has given it all possible moral support and appropriate information concerning the refugee situation. It is understood that the Committee for Emergency Aid to Pakistan arid India has already shipped considerable quantities of relief supplies to the two countries and that one hundred volunteer workers are now engaged under its auspices in relief work on both sides of the Pakistan-India frontier.

Some weeks ago it was suggested in a communication addressed to the Government of Pakistan through the Embassy of the United States at Karachi, that the Government of Pakistan establish a fund in the rupee equivalent of $2,000,000 to enable the American Relief Committee to utilize such personnel and relief supplies as may be available locally. Thus far no response has been received to this suggestion.3

  1. Not printed.
  2. Not printed.
  3. Representative of Pakistan in Washington doing preliminary investigation on procurement of a short term $45 million loan for his country.
  4. Not printed.
  5. In a follow-up memorandum of December 29 the Department corrected this last paragraph by the following statement: “Subsequent investigation reveals that the Government of Pakistan’s consideration of the establishment of a fund for the utilization of the American Relief Committee was not invited, in the form of a communication from the Embassy of the United States at Karachi, but that the Government of Pakistan was approached through its Consulate at New York City directly by the Committee for Emergency Aid to India and Pakistan, with a suggestion that the volunteer agencies effecting shipments to Pakistan be reimbursed in rupees by the Government of Pakistan in the amount of the overseas freight charges incurred. The funds thus received by the agencies would be employed in Pakistan for the distribution of supplies and the maintenance of relief personnel.” (845F.51/12–2947)