Office of the Historian

497. Information Memorandum From the President’s Special Assistant (Rostow) to President Johnson1

Washington, May 23, 1968.

SUBJECT

  • India Debt Relief

You directed us in March to join in negotiation of a debt relief package for India, as recommended by the World Bank. Our two primary goals in the negotiation were: (1) a formula assigning the largest share of relief to countries whose aid has been on hardest terms; and (2) $100 million in total annual relief for the next 3 years.

We have come out with a good bargain which meets those goals. The package is scheduled to be formally blessed by the other donors at the India Consortium meeting here today. Below is a table showing the agreed annual payments to be postponed. The U.S. share is $8.7 million per year, less than 9% of the total and less than any other major donor.

Amount of Debt Relief ($ millions)
Donor Annual Share
Germany $ 27.5
United Kingdom 18.0
Japan 16.8
World Bank 15.0
United States 8.7
Italy 5.5
France 5.2
Austria 0.9
Belgium 0.9
Canada 10.8
Netherlands 0.8
Total $100.1

This package will commit the Indians to press the Soviets for comparable relief and to adopt prudent limits in accepting future credits. We’re still not satisfied that all the Consortium donors are giving relief on as easy terms as they might. Therefore, though this is nominally a 3-year arrangement, we plan to participate with a firm commitment for only one year to preserve our leverage for the next two.

[Page 978]

All in all, other donors have been much more forthcoming than most of us expected. This package does not increase their total aid to India, but it makes what they do provide much more useful in economic terms. More important, it establishes the principle that those who insist on hard loan terms end up bearing the burden of debt rollover—a point we have been trying to get across for years.

The U.S. amount is below the cutoff calling for Presidential review, but I thought you would be pleased to know that a fair bargain has been struck.

Walt
  1. Source: Johnson Library, National Security File, Country File, India, Vol. XI, Memos, 2–10/68. No classification marking. A handwritten note on the memorandum indicates it was received at 11:11 a.m.↩