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335. Memorandum From the Assistant Secretary of the Treasury for International Affairs (Bergsten) to Secretary of the Treasury Miller 1

SUBJECT

  • IDA VI—Completing the Negotiations

The Issue

Negotiations for the Sixth Replenishment of IDA are nearing a conclusion. When they began eighteen months ago, the Bank proposed a $15 billion replenishment with a U.S. share of 31 percent—implying $1.6 billion a year in appropriations for FY 1981–83. When the President initially reviewed the issue, in June 1978,2 he approved a range of $1.2–1.6 billion per year for the U.S. contribution as a key part of his (then) effort to double U.S. concessional aid by FY 1982.

During the long series of negotiations, during which we have made no money commitment, we have successfully argued that the Bank’s proposal was too ambitious regarding both size and U.S. share. A consensus has now emerged among the other donors on a $12 billion replenishment. This amount would represent 5 percent real growth over IDA V, thus fulfilling a Bonn Summit commitment.

At the same time, in response to a sense of the Congress resolution attached to last year’s appropriation bill,3 we have made it clear that our share cannot exceed 27 percent. Other donors are reconciled to accept this decline from our 31.4 percent share of IDA V. We have also made it clear that we are not yet in a position to agree to the $12 billion level.

The negotiations must now be wrapped up by mid-December so that we, and other donors, can include the first installment of IDA VI contributions in budgets for FY 81. It appears that the deal can be concluded at the next IDA Deputies Meeting on December 12–13, if the [Page 1063]United States is ready—which, because of our own budget timing, we must be.

Proposed Position

I think we should support a $12 billion replenishment and a U.S. share of 27 percent. This would result in an average annual contribution of $1,080 million which represents real growth of less than one percent over our IDA V contribution. State, the White House and all other agencies support this figure.4

This level is far less than the President initially approved ($1.2–1.6 billion annually, with a preference for the $1.4 billion midpoint). It is less than the $1.2 billion figure in the spring budget review. It is far lower than the Bank requested and the State Department thought was appropriate. It is less than Congress appropriated for IDA in each of the last two years ($1,258 million for FY 79 and apparently $1,072–$1,092 million for FY 80, though each of those numbers included IDA IV arrearages as well as IDA V current payments).

In response to the expressed concern of Congressman Obey that the IDA figure be kept below $1 billion in politically difficult 1980, we have negotiated an arrangement to stairstep our actual payments. The FY 81 total figure would thus be about $980 million. OMB would greatly appreciate stairstepping, as it would help relieve the intense budget pressure for next year.

Hill Considerations

We have carried out Congressional consultations on IDA VI, and it is these—plus the difficulties of this year’s Hill battle and the overall budget tightness—which have led us to cut back the proposed numbers so sharply. The Hill reactions have ranged from cool to hostile, and some of our leading supporters—including Senator Javits and Congressman McHugh—counsel that we support the international consensus but frankly tell the other contributors that we may not come up with our full payments on time. There has, however, particularly in the Senate, been strong support for our success in negotiating the sharp reduction in the U.S. share.

We have deliberately left Representative Obey, the most important House member, until last—although we have had extensive discussions with him on the subject earlier, and know that he has concern about our numbers. We simply cannot risk consulting with him on IDA VI until the current conference is completed, but will do so immediately thereafter.

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You have suggested a meeting with McNamara and key Congressmen prior to the final IDA negotiating session. We will try to set up such a meeting, probably for the first week of December, although it may be difficult in light of meshing everyone’s schedules.5 In any event, we will convey our intentions to all key members with adequate time to get their reactions prior to final action.

Conclusion

IDA is the centerpiece of U.S. North/South strategy. It is also the largest source of concessional assistance to Black Africa. At a time when the U.S. is being criticized internationally for its relatively low level of foreign aid, we will be able to take credit for a successful conclusion to the IDA negotiations at very little increase in budgetary cost. Indeed, almost all the real growth in IDA will come from other donors.

I therefore recommend a U.S. position of 27 percent of a $12 billion IDA VI replenishment, as the basis for final Congressional consultations and inclusion in the FY 81 budget.

Approve6

Disapprove

Let’s meet

  1. Source: Department of the Treasury, Office of the Secretary, Executive Secretariat, 1979 Files, 56–83–70. No classification marking. Sent for action. Sent through Solomon. Drafted by Department of the Treasury staff member Steven Tvardek. Reviewed by Department of the Treasury staff members Joseph Winder, King (not further identified), and Eva Meigher and Nachmanoff. Also reviewed by the Department of the Treasury Executive Secretariat on November 12.
  2. Not found.
  3. In October 1978, Congress passed and Carter signed into law the Foreign Assistance and Related Programs Appropriations Act (P.L. 95–481). Attached to the legislation was a sense of Congress resolution asserting that the United States’ IFI contributions should henceforth be below various set percentages.
  4. Miller underlined this sentence and put a checkmark in the adjacent margin.
  5. Miller put two checkmarks in the margin adjacent to the first two sentences of this paragraph.
  6. Miller indicated his approval of this recommendation and wrote: “Bill, 11/15/79.” On January 17, 1980, the IDA announced the successful negotiation of its sixth replenishment in the amount of $12 billion. The United States’ contribution was to be $3.24 billion, or 27 percent of the total replenishment. (Hobart Rowan, “World Bank’s Affiliate Gets Expanded Funding,” The Washington Post, January 18, 1980, p. F2)