Current Economic Developments, Lot 70 D 467
Current Economic Developments
[Extract]
No. 224
International Bank Makes Timber Loans to Yugoslavia and Finland
The International Bank [for Reconstruction and Development] has extended loans totalling $5 million to Yugoslavia and Finland to finance the purchase of timber-producing equipment for the development of the timber resources of these countries. Of this total, Yugoslavia is to receive $2.7 million, and Finland $2.3 million. These loans are part of the timber equipment project developed early in 1948 by the Food and Agriculture Organization, the Timber Committee of the Economic Commission for Europe and the Bank to alleviate the current and prospective shortage of timber in Europe by expanding production in certain timber-exporting countries and to encourage the cooperative development of east-west trade.
Under this project, the Bank makes loans to timber exporting countries of amounts necessary to finance the dollar purchases of equipment, while European sources supply an approximately equal amount of other timber-producing equipment without financial assistance from the Bank. It is estimated that the machinery to be obtained in this [Page 158] connection will enable these countries to increase their annual production and export of timber by many times the amount of the loans. The timber-importing countries of Europe will benefit from the increased availability of European timber supplies which will reduce their dependence on imports of timber from North America, which must be paid for in dollars.
Timber Payments Agreements The timber equipment project provides that the principal timber-importing countries of Europe enter into payments agreements with the timber exporters whereby the former pay dollars to the Bank for a sufficient part of the timber they import to ensure repayment of the Bank’s loans. In its loan agreement with the Bank, Yugoslavia undertakes to enter into such agreements with the UK, the Netherlands, France and Italy, while the latter have already agreed to pay in dollars for $1.7 million, $400,000, $200,000 and $400,000 worth of Yugoslav timber respectively. Such agreements were not required by the Bank ill the case of Finland because of possible conflicts with provisions of outstanding Finnish security issues. However, the Finns have notified the Bank of their intention to enter into agreements with Belgium, Denmark and the UK. Belgium has already indicated its willingness to pay in dollars for $450,000 worth of Finnish timber, Denmark for $450,000 and the UK for $1.4 million.
Other Exporting Countries in the Project The timber exporting countries originally included in the project were, in addition to Yugoslavia and Finland, Czechoslovakia, Austria and Poland. Of these, Czechoslovakia is still negotiating with the Bank for a similar loan and Austria has indicated a desire to participate but has not yet started negotiations with the Bank. Poland, on the other hand, has advised the Bank that it could satisfy its timber equipment needs without Bank financing and therefore would not apply for a loan.
Loan Terms The loans to Yugoslavia and Finland are for terms of two years, maturing on September 30, 1951. They carry a 2% interest charge, a 1% charge for the Bank’s special reserve fund, and the Bank’s usual commitment charge of 1.5% on the undisbursed part of the loans.
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