Foreign Relations of the United States, 1958–1960, Foreign Economic Policy, Volume IV

186. Memorandum From Secretary of the Treasury Anderson to President Eisenhower⁰

December 3, 1959.

SUBJECT

• International Development Association (IDA)

The IDA would be a new international institution, affiliated with and staffed by the World Bank, to provide financing for economic development of less developed areas on terms easier than World Bank terms, for example, by offering “soft” loans, i.e., loans repayable in local currency, or loans repayable in hard currency but at low interest rates and with long repayment periods. Membership would be open to all members of the World Bank, and financing would be available to the less developed countries joining IDA and to dependent territories of the industrialized countries. Initial capital would be $1 billion of which the United States would subscribe about $320 million and the other industrialized countries about $440 million, all in convertible currencies freely usable in member countries. Less developed countries would subscribe the remainder, most of which would be in their own currencies. Subject to special agreements, IDA could receive and make use of foreign currencies acquired by the United States Government under agricultural surplus sales programs. Consideration would be given every five years to the desirability of increasing IDA’s resources by additional multilateral subscriptions.

The consideration of IDA grew out of a suggestion by Senator Monroney which resulted in a Senate Resolution in July 1958. In August of that year, the President, in reply to a letter from Treasury Secretary Anderson, requested the Secretary to initiate negotiations looking toward the establishment of an IDA as an affiliate of the World Bank if, as the result of informal discussions with other governments, the creation of such an Association appeared feasible.¹ Broad international acceptance of the idea developed.

In his address of welcome to the Governing Boards of the World Bank, the International Monetary Fund and the International Finance Corporation at their Annual Meeting in September 1959, the President gave his support to the creation of an IDA. (The text of the President’s address is attached.) During the course of the meeting the World Bank Governors unanimously approved a United States Resolution that a charter of an IDA be drafted.² This charter is now being negotiated by the Executive Board of the World Bank, the U. S. member of which is Assistant Secretary of the Treasury T. Graydon Upton. It is anticipated that the charter will be ready for formal submission to governments early in 1960 and that presentation to Congress will follow shortly thereafter.

Primary United States interest in IDA is based on recognition of the need for capital in many areas of the free world for financing sound development projects which cannot now be financed on terms offered by the World Bank and other sources, and on the recognition that other industrialized countries can and should make substantial additional capital available to these less developed areas. It is important, however, that any provision of easier financing be supplementary to the World Bank and not compete with it or impair its strength or prestige. The first draft of an IDA charter now under consideration demonstrates clearly the broad agreement among industrialized as well as less developed countries that an IDA can become an important new source of capital for promoting economic development within a framework which would safeguard existing institutions and traditional forms of private finance.

If appropriate during his discussions, it might be desirable if the President expressed confidence that the country concerned will wish to give its support to IDA and to join in this cooperative effort.

One of the most difficult questions which has arisen during the negotiations of the IDA charter is whether IDA should have the authority to make grants as well as loans. As the result of pressure for a provision on grants, the charter as now drafted contains some flexibility on this question in connection with future capital. The U.S. Delegation is taking a firm position, however, that IDA should have no authority to make grants from its initial capital, and it is believed that a satisfactory charter will be worked out on this basis. The reason for the especially firm U.S. position is the belief of the importance of this point in presenting the IDA charter to Congress.

0. Source: Eisenhower Library, Whitman File, Administration Series, Anderson, Robert B., Secy Treasury, 1959 (1). Official Use Only. Prepared for Eisenhower’s good will trip.
1. See Document 154.
2. For text of Eisenhower’s September 28 address, see Public Papers of the Presidents of the United States: Dwight D. Eisenhower, 1959, pp. 702–704. For text of the IBRD resolution, see American Foreign Policy: Current Documents, 1959, p. 227, footnote 10.