Office of the Historian

126. Memorandum From Robert Komer of the National Security Council Staff to President Johnson1

Washington, June 5, 1965.

I hesitate to bring this matter up again, but a new wrinkle has developed on remaining FY 65 aid loans to India and Pakistan. Otto Passman2 is pressing Dave Bell on how much money AID expects to have left over at the end of this fiscal year. Bell seeks guidance as he feels he can’t delay answering Passman beyond next week or the latter will begin to smell a rat.

A lesser problem is that the Indians and Paks are beginning to ask insistently how soon some of these loans will be released. They are not aware to date of any hold order; instead we think the Indians in particular are worried because their foreign exchange reserves have dropped to a record low of $162 million (they’ve even been forced to draw a $125 million standby from the IMF).

To recap, AID and State seek a go-ahead on three categories of aid: (a) Some $227 million in loans to India and $18.5 million to Pakistan, which have already been approved, authorized, and announced, and where only formal loan agreements remain to be signed; (b) some $76 million in loan applications for India and $51 million for Pakistan—AID would like to authorize those which pass muster; and (c) new program loans of up to $100 million for India and up to $70 million for Pakistan as a first installment on this year’s pledges. All but the new $70 million for Pakistan is covered by pledges already made.3

Bell expects to obligate fully all other AID funds, so his answer to Passman depends essentially on the India/Pak items above. There seem to be three options:

A.
Authorize Bell to proceed to the extent necessary to obligate all FY 1965 aid funds before 30 June, but to continue holding off on anything beyond. This is the course which State and AID recommend on foreign policy grounds, and to meet existing commitments. It would also permit Bell to meet the Passman problem.
B.
Authorize proceeding on all previously announced loans and other feasible project loans, but not the new program loans for India [Page 269] or Pakistan. In this case Bell sees us falling short on obligating FY 65 funds by about $125–175 million.
C.
Hold off on all further loans to India and Pakistan in which case AID will have about $250–300 million in Development Loan funds left over.4

R. W. K. 5

Approve Course A, B, C. (check your choice), or

Tell Bell to keep stalling Passman until we can discuss the matter further

or

Speak to me6

  1. Source: Johnson Library, National Security File, Memos to the President, McGeorge Bundy, Vol. 11, June 1965. Secret.↩
  2. Otto E. Passman, Representative from Louisiana, Chairman of the House Subcommittee on Foreign Aid.↩
  3. At the twelfth meeting of the India consortium, held in Washington on April 21, the United States pledged $435 million of the $1,027,160,000 pledged by the consortium to support India for FY 1965–66. (Circular airgram CA–12756, May 28; National Archives and Records Administration, RG 59, Central Files 1964–66, AID 9 INDIA)↩
  4. Bundy sent this memorandum to Johnson on June 5 with a covering memorandum in which he explained that Komer had prepared his memorandum at Bundy’s request. Bundy noted that he strongly favored alternative A of those listed in Komer’s memorandum. (Ibid.)↩
  5. Bundy initialed below Komer’s initials.↩
  6. This option is checked.↩