896.51/4–2947: Telegram

The Chargé in the Philippines (Davis) to the Secretary of State


689. For State and Treasury. This is Treasury cable No. 281.

Part 1

Philippine Government note dated April 25 received by Embassy April 28 formally requests that the balance of RFC authorized loan amounting to $50 million be made available as soon as possible under the same terms and conditions as the previous loan. The note states that the request has been held in abeyance until an interim report by the Philippine-American Finance Commission could be submitted covering the extent of actual need for the loan. A copy of the interim [Page 1110] report of the Commission including its recommendations is enclosed with the note.

Part 2

The Commission recommended that the RFC extend a further line of credit of $50 million to the Philippine Government under public law 656 as follows:

  • “1. $35 million to be advanced from time to time on or before June 30, 1947, as requested.
  • 2. An additional $5 million to be advanced on or before June 30, 1947, if requested, provided that the unexpended balances of $5 million of taxes collected by the United States under the provisions of the Sugar Act of 1937 have not been remitted to the Philippine Government. When such balances are remitted, they shall be applied either to the reduction of the line of credit by the amount remitted or to the repayment of any advances made.
  • 3. The additional $10 million of the line of credit to be advanced at any time on or before September 30, 1947 upon delivery to the Reconstruction Finance Corp of a certificate of the Auditor General of the Republic of the Philippines stating the amounts of the following items for the fiscal year ending June 30, 1947:
    Ordinary revenues of the general fund consisting of revenues from taxation, after apportionment to the local governments, incidental revenues, earnings and other credits, receipts automatically appropriated.
    Sums transferred after April 1, 1947, to the general fund from other governmental funds, and
    Cash realized from substitution of promissory notes for cash already paid or to be paid by the Philippine Government to the International Bank for Reconstruction and Development for capital stock subscriptions during fiscal year 1947.

The aforesaid $10 million of the line of credit shall be reduced by the dollar equivalent of the amount by which the sum of items (a), (b) and (c) above exceed 125 million pesos.

The above recommendation, if adopted by the Reconstruction Finance Corp after consultation with the National Advisory Council, will, in effect, guarantee to the Philippine Government that the 100 million pesos which the Commission believes will be needed will be provided either from advances under the recommended line of credit or from the sources mentioned above. It is impossible at this time to predict accurately what additional funds may become available to the Philippine Government from those sources. The Commission therefore proposes the foregoing formula to obviate borrowing which might prove to have been unnecessary upon determination of the availability of other funds.

The Commission recommends that loans advanced under this line of credit be made at an interest rate of 2 percent and be repayable July 1, 1953, except as earlier repayment may be required under the provisions of paragraph 2 above.

The Commission does not recommend any change in the terms or conditions of the loan agreement signed March 5, 1947.”

[Page 1111]

Part 3

The Embassy replied with a note to the Philippine Government April 29 calling attention to the advisability of agreement between the official loan request and the recommendations of the Finance Commission. Reference was also made to the advice received that the 5 million dollars of taxes collected by the US under the provisions of the Sugar Act of 1937 will be remitted to the Philippine Government probably within a week, thus immediately reducing the size of the estimated deficit.

Part 4

Copies of loan request with supporting financial data, the report of the Finance Commission and the Embassy note of April 29 being forwarded via airpouch today.15

  1. Despatch 748, April 29, from Manila, not printed. The balance of the credit was authorized on June 12.