Foreign Relations of the United States, 1958–1960, South and Southeast Asia, Volume XV

186. Memorandum of a Conversation, Department of State, Washington, June 6, 1958¹

Washington, June 6, 1958

SUBJECT

• Ceylon’s Need for Additional Economic Assistance

PARTICIPANTS

• The Secretary
• Mr. Stanley de Zoysa, Ceylonese Finance Minister
• Mr. R.S.S. Gunewardene, Ambassador of Ceylon
• Mr. Philip K. Crowe, S
• Mr. William M. Rountree, NEA
• Mr. Frederic P. Bartlett, SOA

The Ceylonese Finance Minister opened the conversation, which had been arranged at the request of the Ceylonese Embassy, by expressing the gratitude of his Government and of his country for the economic assistance which had been so generously given by the United States, particularly in connection with flood relief. The Government of Ceylon was still faced with a serious problem and was turning to its known friends for help. The Finance Minister himself was here to explain the problem and to stress the political aspects of it. He already had the opportunity to do this in some detail in a meeting the previous week with Mr. Rountree. Basically it could be summarized very briefly. It was simply that if the Government could not satisfy the common man, there very well might be a sharp swing in Ceylon to the extreme left. It was for this reason that the Government of Ceylon felt it impossible to reduce its social welfare expenditures in order to divert the resources allocated for them to longer term development purposes. The Finance Minister inquired whether the Secretary wished him to go into more detail regarding the situation.

The Secretary indicated that he believed it was not necessary to review the details which had already been discussed at some length with Mr. Rountree and other United States Government officials. He inquired, however, whether fundamentally the Ceylonese economy was not in fairly good shape. This was true, the Finance Minister replied. Even Ceylon’s external assets were sufficient, at least for immediate needs, but he did not wish to draw down the country’s basic reserves of foreign exchange at this time.

The Secretary expressed appreciation of Ceylon’s budgetary position, noting that the United States also had budgetary problems of its own. At present the two principal sources of funds for United States foreign assistance were the Export-Import Bank and the Development Loan Fund, but the latter was faced with applications involving a much larger amount than it had resources to provide. The Secretary continued that the United States Government was currently going through the complicated legislative procedure required to provide additional resources for the Development Loan Fund, noting the difference between authorizing and appropriating legislation. As far as the general Mutual Security program was concerned, the Congress had not yet even approved the authorizing Act. He did not know if, in connection with the Development Loan Fund, the Congress would eventually appropriate the full amount as authorized last year. It was shocking, the Secretary said, that the nations of the world could not reach agreements which would bring a stop to the terribly expensive arms race and permit them to divert the resources involved therein to increasing the general welfare of their people. It would certainly be better to spend funds for aid to Ceylon, for instance, than for dropping missiles in the Atlantic Ocean. First, however, it was obvious that we must defend ourselves; otherwise, everything else would be of little avail. Thus, both the United States and Ceylon had their own problems. In their solution, it was necessary for both countries to help each other to the greatest degree possible.

The Secretary said that Ceylon’s requests were being considered carefully and with understanding. He inquired whether the Finance Minister had discussed the possibilities of Export-Import Bank assistance, to which Mr. de Soyza replied affirmatively, indicating that a group was presently studying possibilities of aid from this source, although the “Buy America” limitation on its funds might pose a problem. This might be true, the Secretary replied, but in effect, if not legally, the Development Loan Fund also was itself under pressure to restrict its assistance to purchases from the United States.

The Secretary noted that the United States recognized the political problems which the Ceylonese Government faced. What he had said, however, was about all that it was possible for him to say at the present time. The Secretary could not state in dollars and cents just what the United States might be able to do, but it would do its best. The trust of Ceylon in the United States had not been misplaced.

The Finance Minister thanked the Secretary for having received him and stated that, even if no financial help could be extended to Ceylon as a result of his talks here, his visit could not be considered as having failed; for it had given him an opportunity to meet American officials and to learn of the interest which the United State Government took in the welfare of his small country.²

1. Source: Department of State, Central Files, 746E.5–MSP/6–658. Confidential. Drafted by Bartlett.
2. On June 27, the Department of State was instructed to deliver a letter from President Eisenhower to Prime Minister Bandaranaike, dated June 23, which reads in part as follows: “We welcomed the visit of your Finance Minister as your special representative and I am pleased that he had the opportunity of meeting Secretary Dulles and the heads of the various agencies of our Government concerned with economic assistance programs. I am informed that as a result of these meetings Ceylon’s financial problems with respect to development are receiving careful consideration. We are approaching these problems with the same friendly interest that we displayed during the difficulties your country experienced because of the floods some months ago.” (Telegram 880 to Colombo, June 27; ibid., 846E.10/6–2758)