346. Telegram 166666 From the Department of State to the Embassy in Afghanistan, September 10, 1971, 2109Z1 2

[Page 1]

166666

102109Z SEP 71

ROGERS

E/IFD/ACCIZAUSKAS

9/10/71 EXT: 21548

E/IFD/SWEINTRAUB

NEA/PAF - MR. FLATEN

TREASURY - MR. SYVRUD [SUBS]

E/IFD/ODF - MR. KENNEDY [SUBS]

IMF - MR. DALE [INFO]

IBRD - MR. WEED [SUBS]

ROUTINE KABUL

ROUTINE MOSCOW

BONN

LONDON

TOKYO

REF: KABUL’S 542117

SUBJECT; DEBT RELIEF

IN ADDITION TO GUIDANCE PROVIDED IN STATE 153803, YOU SHOULD INFORM RGA AS FOLLOWS:

1.
WE UNDERSTAND AND SYMPATHIZE WITH RGA DEBT PROBLEMS. HOWEVER, WE SUPPORT YOUR ADVICE TO RGA THAT WE CANNOT AGREE TO ANY UNILATERAL MORATORIUM ON DEBT OBLIGATIONS. MORATORIUM UNACCEPTABLE FOR BOTH STATUTORY AND POLICY REASONS.
2.

USSR ACCOUNTS FOR ALMOST THREE-QUARTERS OF AFGHAN’S FOREIGN DEBT AND OVER 50 PERCENT OF TOTAL DEBT SERVICING OBLIGATIONS IN 1971 AND 1972. GERMANY, WHOSE DEBT SMALLER THAN OURS, SCHEDULED TO RECEIVE ABOUT ONE-THIRD MORE IN DEBT SERVICE PAYMENTS THAN US DURING THESE YEARS. [UK AND JAPAN ARE MINOR CREDITORS]. THESE STATISTICS INDICATE THAT AFGHAN DEBT PROBLEM IS MULTILATERAL AND MUST BE SO APPROACHED.

THUS, RGA SHOULD FIRST PRESENT ITS CASE FOR DEBT RELIEF TO IBRD, INSTITUTION WHICH PRIMARILY CONCERNED WITH LDC DEBT PROBLEMS. IF CONVINCED OF NEED FOR DEBT RELIEF, IBRD WOULD THEN PRESUMABLY APPROACH CREDITORS ON MULTILATERAL BASIS. HOWEVER, APPLICATION, OR EVEN THREAT, OF UNILATERAL MORATORIUM COULD ADVERSELY PREJUDICE [Page 2]CONSIDERATION OF AFGHAN REQUEST BY IBRD AND CREDITORS.

ESCHENBERG OF IBRD ENROUTE TO KABUL FOR CONSULTATIONS WITH RGA PROVIDING TIMELY OPPORTUNITY FOR RGA TO BROACH DEBT PROBLEM WHICH WE UNDERSTAND NOT YET DONE.

3.
AT SAME TIME, RGA MAY WISH TO DISCUSS WITH IMF STABILIZATION PROGRAM AND POSSIBLE STAND-BY CREDITS AS IS CUSTOMARY WITH LDC’S EXPERIENCING DEBT PROBLEMS. STABILIZATION PROGRAM UNDER CURRENT CIRCUMSTANCES MIGHT TAKE INTO ACCOUNT DOMESTIC AFGHAN FISCAL SITUATION AND MEASURES TO STRENGTHEN BALANCE OF PAYMENTS INCLUDING CONTROLS ON EXETERNAL DEBT. YY

  1. Source: National Archives, RG 59, Central Files 1970–73, FN 14 AFG. Confidential. Drafted in E/IFD by Albert C. Cizauskas and Deputy Assistant Secretary of State Sidney Weintraub, cleared in NEA/PAF, in substance with Treasury, E/IFD/ODF, IBRD, and in information in IMF. Repeated to Moscow, Bonn, London, and Tokyo.
  2. The Embassy was instructed to inform the Afghan Government that the United States could not agree to a unilateral moratorium on debt payments.