17. Memorandum From Acting Secretary of the Treasury Walker to President Nixon 1

SUBJECT

  • IDA Replenishment III

World Bank President McNamara is commencing discussions next week on the Third Replenishment of IDA (International Development Association). This first session among the donor developed countries will lay the groundwork for negotiations which McNamara hopes to have completed by mid-summer, well in time for legislation for fiscal year 1972.

IDA is the concessionary lending affiliate of the World Bank and has been replenished at three-year intervals. This spring, as one of the first activities on the legislative calendar, you obtained a three-year authorization for the Second Replenishment of IDA at $480 million as the United States’ 40 percent share of a total $1.2 billion replenishment. This covers fiscal years 1969 through 1971 at $160 million per annum.

This forthcoming replenishment of IDA is complicated by the fact that the management of the World Bank would like to increase the capital [Page 42]of the World Bank. First, they expect increases in Bank capital corresponding to the upward adjustments of relative quotas within the International Monetary Fund. This is customary. Since, for the first time, we are asking for a quota increase at the Fund, we would be expected to go along on a selective capital increase for the United States in the Bank. In addition—and the complicating factor—President McNamara is raising the question of whether the capital of the World Bank should be further augmented by a general increase. It is not possible to increase the contributions to one member of the World Bank Group without raising the question of a “trade-off”, i.e., does a general capital increase for the Bank decrease the amount of the next replenishment of IDA?

Secretary Kennedy has already raised the replenishment and capital increase issues with the National Advisory Council on International Monetary and Financial Policies. It is under study there, and recommendations will be made to you as they become timely. Treasury, in addition, has alerted Mr. Peterson of this pending matter; and we discussed the issues when we appeared before the Peterson Task Force.2 At both the NAC and the Peterson Task Force there seemed to be a general view that the World Bank Group is a very important multilateral aid-giving intermediary and the United States should make every effort to expand the resources made available to this Group and to IDA in particular.

At the preliminary meeting of the donor countries next week, it is premature for the United States to indicate more than that we strongly favor a considerable increase in the resources of IDA at the next replenishment and that we will be working with the Bank and the other donor countries to determine how this end might best be achieved. At the same time we can indicate our willingness to take a selective capital increase in the Bank, but withhold judgment on the issue of a general capital increase. The Bank’s need for usable capital requires further study and, also, we must get a better feel for the “trade-off” of the capital increase and the IDA replenishment. Contributions to IDA, negotiated multilaterally to assure burden-sharing arrangements make it necessary to consider carefully the attitude of other donors. Finally, Congressional contacts are being pursued in order that the pertinent Congressional committees can be kept informed as we proceed.

The attached tables give some of the numbers involved in the World Bank capital issue and the past history of the fundings of IDA.

Charls E. Walker 3
[Page 43]

Attachment4

IBRD CAPITAL INCREASE

($ millions)
Present Capital Structure
Paid-in Callable Total
Total subscriptions 2,304 20,732 23,036
U.S. subscription 635 5,715 6,350
Proposed Selective Increases
Paid-in Callable Total
Increase in total subscriptions 273 2,459 2,732
Increase in U.S. subscription 31 276 307
25% General Increase
Paid-in 1 Callable Total
Increase in total subscriptions 1,153 4,614 5,767
Increase in U.S. subscription 317 1,270 1,587
Paid-in Callable Total
U.S. Percentage Share (%)
Capital Subscription Voting Power
At present 27.5 24.6
After proposed selective increases 25.8 23.4
After both selective increases and 25% general increase 26.1 24.1
[Page 44]

Attachment5

CONTRIBUTIONS OF CONVERTIBLE FUNDS TO IDA
($ millions)

U.S.
Total Total Per Annum U.S. Share
From Industrialized Countries
Initial Subscriptions (FY 61-65) 743 320 64 43.1%
First Replenishment (FY 66-68) 750 312 104 41.6%
Second Replenishment (FY 69-71) 1,200 480 160 40.0%
Voluntary Contributions 69
From Developing Countries
Subscriptions 42
Total 2,804 1,112 39.7%

Note: In addition IDA has received a total of $385 million of net earnings transferred from the IBRD over the period 1964-69.

  1. Source: Washington National Records Center, Department of the Treasury, Secretary’s Memos/Correspondence: FRC 56 74 A 7, Memo to the President 9-12/69. Limited Official Use. Drafted by Petty on December 9. In a December 9 memorandum to Walker, Petty recommended he sign the memorandum and indicated that Kennedy and Volcker asked that the President be informed of the pending replenishment. (Ibid.)
  2. The Task Force on International Development was chaired by Rudolph Peterson; see Documents 119 ff.
  3. Printed from a copy that indicates Walker signed the original.
  4. No classification marking.
  5. The Bank management has suggested payments might be made over a five year period. This would mean an annual payment of $63.4 million for the U.S.
  6. No classification marking.