Foreign Relations of the United States, 1955–1957, Southeast Asia, Volume XXII

78. Telegram From the Embassy in Burma to the Department of State¹

Rangoon, December 12, 1957—9 a.m.

613. Burmese need for early announcement substantial new PL 480 program² has become critical with realization that 1958 rice crop to be harvested December–January will be 15 to 20 percent below 1957 crop. Estimate total 1958 export availability about 1.8 million tons compared 2 million for 1957. Even if higher price obtainable, now appears rice export earnings may decline by $10 to $15 million. Declining metal prices, bad cotton crop are additional factors reducing export earnings 1958.

This prospect reduced earnings next year, coming on top of loss some $30 million foreign exchange reserves so far this year despite $10 million drawing on Indian loan, indicates necessity some action curtail rate foreign exchange expenditure. Reserves now down to about $77 million which lowest since mid-1955 foreign exchange crisis when reserves dropped to about $75 million.

Restriction consumer imports in association continuing government deficit financing would cause resumption upward movement currency circulation and serious price inflation with attendant political and economic difficulties. Cutbacks government spending on development and internal security programs could further undermine public confidence in government and imperil success economic development programs.

Government logically fears seriousness situation will be intensified by rush on imports and hoarding consumer goods especially textiles as general public becomes aware deterioration foreign exchange position. Announcement new PL 480 program would help forestall such public reaction, assist government planners determine nature extent restrictive action needed.

While recognize new PL 480 program would not solve basic problems which have led to foreign exchange drain, it may provide critically needed assistance in helping fill resource gap and maintain stability requisite to implementation programs designed achieve longer run solutions.

Quick action on PL 480 program is important to promotion US objectives in Burma. During past year GUB has shown tendency veer from Communist bloc and toward closer ties with US. GUB regards new PL 480 program as only available means meeting what they consider serious emergency and is counting heavily on quick and substantial PL 480 help. Thus quick action on new PL 480 program, in addition providing important practical support to Burmese economy, would be significant factor further strengthening Burma’s friendship with US, while prolonged delay on our part would dismay and discourage Burmese.

Burma’s minimum textile and yarn import requirements 1958 estimated about $41 million with estimated cotton content about 125,000 bales. To support foreign exchange position, offset inflation, preserve desirable level economic development and internal security programs, forestall domestic political difficulties, Embassy urges US agree negotiate soonest new PL 480 program with minimum 100,000 bales cotton, preferably 125,000. Hope program may also include vegetable oils, wheat flour, tobacco.³

McConaughy

1. Source: Department of State, Central Files, 411.90B41/12–1257. Confidential.
2. See footnote 6, Document 68.
3. Telegram 619 to Rangoon, December 20, informed the Embassy that negotiating instructions for a new agreement were being sent to the Embassy. (Department of State, Central Files, 411.90B41/12–1257) An agreement providing for the sale under Public Law 480 of surplus agricultural commodities valued at $18 million and a loan to Burma of $14.5 million in Burmese currency was signed at Rangoon on May 27, 1958; for text of the agreement and an accompanying exchange of notes, see 9 UST 576.