171. Memorandum of Conversation0


  • Call of Yugoslav State Secretary of Finance Regarding Yugoslav Exchange Reform


  • Mr. Nikola Mincev, Yugoslav State Secretary of Finance
  • Mr. Marko Nikezic, Yugoslav Ambassador
  • The Acting Secretary, Mr. Dillon
  • Mr. Weiss, OT
  • Mr. Katz, EE

After an exchange of pleasantries, Mr. Mincev stated that he wished to inform the Acting Secretary of the present status of consideration of the Yugoslav exchange reform proposals. He explained that Yugoslav officials have been working with the staff of the Fund and, as a result of the two missions sent to Yugoslavia,1 agreement had now been reached on the measures to be taken. The Yugoslav Government in the course of discussions with the Fund had accepted a number of Fund suggestions, such as increasing the rate to 750 dinars to the dollar. The task now was to assure that the reform would be realized. Mr. Mincev pointed out that they were at a critical stage, since the reform should start on January 1, 1961. Because of the need to coordinate the reform with the start of the annual economic plan and annual budget, to postpone the implementation of the plan would mean postponement for a whole year.

Mr. Mincev proceeded to indicate the problems in the path of early implementation of the reform. The first problem concerned the amount of the drawing from the Fund. Yugoslavia has been assured that it can draw $50 million. He felt, however, that on the basis of need and the statutes of the Fund a larger drawing would be indicated. He stated that Mr. Jacobsson had not excluded a larger drawing, but Mr. Jacobsson felt that this should be considered after it is clear to what extent other countries would participate in supporting the reform. Mr. Mincev stated that he would appreciate the support and understanding of the American Director in the Fund.2

[Page 462]

The second question concerned the participation of Western Europe in supporting the program. He reported that his Government, through diplomatic channels, had informed the governments of Western Europe of the exchange reform proposals and the need for external support to assure the success of the program. Mr. Jacobsson had offered to help the Yugoslavs and planned to give a luncheon on September 25 to afford the Yugoslav representatives an opportunity to explain to representatives of various governments the details of the program and the requirements for external support. With regard to the procedure for arranging external support, Mr. Mincev envisaged the possibility of arranging a program of support by means of a group of countries. He stated that Mr. Jacobsson was of the opinion that the task of arranging for support for the program was not formally a function of the Fund. Mr. Mincev agreed that the Fund should not proceed in this matter on a formal basis but he thought a practical means of approach might be to work with the various countries through the directors of the Fund. He was concerned that if the Yugoslav Government were to approach this matter on a bilateral basis the result would be lengthy negotiations with dubious prospects. He pointed out that the approaches which had already taken place through diplomatic channels have not produced any firm responses. He mentioned in this connection that an approach had been made to the Governor of the German Bundesbank, Mr. Blessing. At first Mr. Blessing had indicated considerable interest but he later indicated that he could do nothing in view of the absence of diplomatic relations between the Federal Republic and Yugoslavia. Presumably this attitude came after consultations with his Government.

The third question concerned the attitude of the US and the possibility of obtaining support from the US Government. He said that it was evident that the success of the program depended in large part on what the US could offer.

The Acting Secretary stated that we were pleased that the Yugoslav Government had reached agreement with the Fund staff on the details of the reform program. He stated that we were fully prepared to support the program in accordance with the means we have available and we are prepared to proceed parallel with the support which can be obtained from Europe.

Taking the questions raised by Mr. Mincev in order, he stated, first with respect to the drawing from the Fund, that he considered this question the least important. Even if the drawing were not increased beyond $50 million, the funds would still be there and available. He was sure that the US Director would have an open mind and when the facts with respect to implementation of the program were clear, this question could be reconsidered. He was sure that no one would allow the program [Page 463] to fail because of the small amount of money involved in a future drawing.

With respect to the participation of European countries, the Acting Secretary agreed with the Minister’s thoughts concerning procedure. He felt it was important to have consideration of this matter centralized somewhere and the facilities of the Fund seemed to offer the best possibilities at the present moment. Bilateral talks would take too long and would not be a satisfactory alternative. The Acting Secretary stated that we felt that full participation by Western Europe was essential to the success of the Yugoslav reform program. We believed that European participation should be at least equivalent to our own. We were therefore fully prepared to do anything we could do bilaterally or in other ways to bring about European participation. The Acting Secretary stated that we would be interested in working closely with the Yugoslav officials to have their opinion as to which countries offer the most likely prospects. We considered that the most immediate advantages of the program would flow to Western Europe. We would, therefore, welcome any information regarding trade prospects which would be helpful in obtaining European support in order to put the package together.

The Acting Secretary indicated that he was concerned by what the Minister had said regarding the attitude of Germany. It was our feeling, he said, that it would be essential to get a substantial contribution from Germany. He recognized that the absence of diplomatic relations between Yugoslavia and Germany presented a problem but he stated it would not matter in what form the German contribution was made. It was essential, however, that it make a contribution.

Mr. Mincev at this point reported in some detail the discussion which had taken place with Mr. Blessing. He stated that at a meeting in Basle of the Governors of central banks Mr. Jacobsson had assisted Yugoslav officials in getting in touch with officials of other banks. Mr. Blessing showed greater interest than any of the other Governors. It was proposed that he visit Belgrade, not to commit him to a specific contribution but to discuss the details of the program with him. Mr. Blessing, however, subsequently terminated the correspondence, indicating that he could not come to Belgrade nor take part in discussions on this subject. He stated that he had been told that if the Yugoslav Government wished to discuss this matter with the Federal Republic it would know how to do so.

The Acting Secretary asked whether trade between Yugoslavia and Germany did not remain substantial. Mr. Mincev stated that this was so, that West Germany and Italy were Yugoslavia’s two most important trading partners. At the moment Italy was first, Germany was second and the UK third.

[Page 464]

The Acting Secretary said that the question of a German contribution was clearly our most immediate problem and that a solution would have to be found to this problem.

With respect to the US contribution the Acting Secretary indicated that we were now in the process of deciding what we might be in a position to do. He said that it had been very helpful to talk with the Yugoslav officials in the past week.3 While we had had information previously from Belgrade and from Fund officials it was extremely useful to have the information first-hand. We were particularly glad to have representatives from our other agencies brought into the discussions. The Acting Secretary expressed the hope that within two weeks we would have a firm position, provided that the European countries go along with us.

The Acting Secretary referred to one general problem which he had discussed with Vice President Todorovic when he was in Belgrade.4 He recalled commenting at that time that the amount of the funds Yugoslavia was requesting for support of the program seemed to be very large. On the basis of the information we have now received this view has been confirmed in all our minds, particularly since it appeared difficult if not impossible to obtain the full amount of support being requested. It appeared to us that the $340 million estimate was more than a minimum. It is not that this amount could not be usefully employed, but it seemed to us that the program could be implemented with less. We were hopeful that arrangements could be made to obtain an amount of support which should enable the Yugoslav Government to proceed with the program even if it were considerably less than the amount previously estimated as being required. The Acting Secretary urged that the Yugoslav Government maintain an open mind on this question because we also hoped there would be no delay in putting the program into effect.

Mr. Mincev expressed appreciation for the assurances of support given by the Acting Secretary and stated that his officials would be at our disposal for any further information that we might require.

  1. Source: Department of State, Secretary’s Memoranda of Conversation: Lot 64 D 199. Official Use Only. Drafted by Katz and approved in U on September 30. Mincev led a Yugoslav delegation to Washington for discussions on the Yugoslav economic development program with U.S. and IMF officials.
  2. Per Jacobsson, Managing Director of IMF, visited Yugoslavia July 1–8; a technical mission arrived in Belgrade on August 10.
  3. Frank Southard.
  4. U.S. and Yugoslav officials held discussions on the dinar exchange rate reform on September 20, 21, and 23. Memoranda of these conversations are in Department of State, Central File 868.131.
  5. See Document 163.