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92. Memorandum From Dean Moor of the Operations Staff of the National Security Council to the President's Assistant for National Security Affairs (Kissinger)1

SUBJECT

  • Growing Economic Problems in South Vietnam

During the last few weeks we have been getting an increasing number of reports from a wide variety of sources indicating that the problems of inflation, budget deficit, mismanagement and other economic woes have sharply increased in intensity over the last few months. Already, these problems are beginning to sap some of the Government's vitality in attempting to build a competitive position against Communists in a future post-war environment.

The cable at Tab A2 is a rather good summary of the current scene. It sets out the views of an International Monetary Fund expert who made a study of the situation. His views are based on several previous IMF studies. Following are some of the highlights:

  • —The overall price stability maintained this year has cost the GVN some $80,000,000 in reserves. Loss of similar magnitude can be expected during the rest of 1969.
  • —Even so, maintenance of price stability is questionable in view of the recent GVN wage increase, probability of extra heavy military expenditures and other factors.
  • —The only solution is a massive new tax program. Both IMF and GVN officials, however, believe it impossible for the GVN to implement a significant tax program.
  • —The situation is of such concern to the GVN that a shakeup in the economic leadership of the regime is contemplated, but few believe that this will do much good.
  • —The U.S. economic advisors in Saigon generally agree with the IMF view.

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 1320, Unfiled Material, 7 of 19. Secret. Sent for information.
  2. Tab A, telegram 13078 from Saigon, June 28, is attached but not printed.