RELEASE OF LDC DEBT SERVICE BURDEN: A COMPARISON OF WESTERN AND COMMUNIST PROGRAMS, SEPTEMBER 1973, UNCLASSIFIED, TO FOREIGN GOVERNMENTS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T01098A000100160001-8
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 63
• Document Creation Date: November 16, 2016
• Document Release Date: February 28, 2000
• Sequence Number: 1
• Publication Date: October 17, 1973
• Content Type: MF

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M.IaMOR.Al~TDUM FOR; CRS/ADD Release
SUI3~FC`1,:. Release of LAG Debt Service Burden:' A
Cnrn ari ?nn of Western and . Cnrnrnunf et
Frogra~ms~ September I973, Unclassified.
to Fnreign ~averr-ments
1. It is requested that the at4ached copy of subject report 1ac;~
forwarded as follows:
STATINTL
1 capy
~, All OER responsiliil.ities as defined i.n the DDI men~orandurn
of 13 August 1952, "Procedures for Di.ssernination of Finished
lntellige~.zce to Foreign Governments, " as applicable to tlv.s report
have been fulfilled.
STATINTL
1 Attachment
:.;~ r. r_tiaesizd by
~ mu noran.lum ilv assn co4roPlet~Gli ,
,~. ~~ fI
E)atc3_ /0~_/~9v/~
Chief, StJpIC/OER
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7 Sept~e~er l~'~.~
STATINTL
A~~' Cep I]1'V].:3i4)S`ts
~,~3C D~~t Sarvi c~ Harden
A Coznpari:~~n ~~ '~7eatern and
C~a~uxaiat ~rogram~-
STATINTL
r~ttarhed i~ the unc3.aeeif~.ed pa~aer which compares
the burden vn I.~Ga ~~ re~aa~ra~er~t~s e~f ;td+e~tern anti Co~auni~~
aic~, ? ~~'e apolog~.~+~ for the de3.ay in getting it to ~rcauo
It was Iae~.d ~xp in publication.
STATINTL
~.
~~:ve~.oping stations Division
c3ffice o~ E~nc~mi~.c Research
Attarrh~tent :
Aa ~ t~.ted
Distribution: (5-5407)
Orig & 1 -Addressee
Z - D/OER
iY- sA/~R STATINTL
1 - St/P/C
1, - D/D
1 D TA
OER/D/TA~dao/x6202 (7 Sep 73)
~, 0 SEP 1973
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LDC DEBT SERVICE BURDEN:
A COMPARISON OF WESTERN AND COMMUNIST PROGRAMS
Summary
1. The dilemma of increasing amounts of de-
velopment assistance to the less developed countries
(LDCs) in the face of rapidly expanding debt service
is forcing a re-examination of the financial cri-
teria for aid giving. Western nations, responsible
for almost 95~ of the gross bilateral flow of
official capital to LDCs during 1954-72, are re-
sponding to international pressures to obtain uni-
form aid procedures. Communist countries are not.
This situation exists in spite of the less favor-
able terms for Communist aid:
Communist aid has a smaller grant
element than Western aid; it is paid off
faster and absorbs a larger share of the
annual gross capital flow; the cost per
dollar of Communist aid delivered is
higher than for Western aid; and Com-
munist deliveries, net of payments for
principal and interest, are declining
while net Western aid transfers still
are rising. The significant financial
advantage of Communist aid is that
it can be repaid in commodities (often
not salable elsewhere) instead of hard
currency. For some LDCs, this may mean
the disposal of surplus goods for capital
that will enhance development and generate
employment.
2. Creditor nations expect the LDCs to meet
repayment obligations and have provided debt relief
only as a last resort. At the end of 1972 the LDCs
had made principal and interest payments totaling
about US $21 billion for the almost $115 billion of
official bilateral capital provided them since the
beginning of 1954. Still outstanding was some $50
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billion in debts. If repayment of the LDC debt
were to increase as rapidly over the next five years
as during the past five, annual debt service would
rise to about $6 billion in 1977, or twice the 1972
level. To sustain current net aid tranfers in 1977,
official bilateral capital flows would have to in-
crease by about 30~ to more than $13 billion.
Discussion
Introduction
3. The nations of the Third World are trying
to acquire increasing external capital assistance
at a time when their rising foreign debt service
is burdensome. Both Western and Communist donors
are pressed to expand their aid undertakings on
more concessionary terms, sometimes to countries
that are not able to discharge current obligations
or whose debt service is absorbing an inordinate
amount of the capital inflow. Anxious to strengthen
their political and economic relationships with the
LDCs, both are seeking solutions to the debt ser-
vice problem that will allow debtors to sustain de-
velopment efforts without severely impairing their
import capability.
4. A continuing increase in the net capital
flow to LDCs implies a major expansion of gross
disbursements, additional softening of repayment
terms, or relief from current debt obligations.
Each expedient has been employed, often in combina-
tion, but consistent long-term approaches to the
problem have only recently begun to emerge. In
spite of these problems, both Eastern and Western
creditors expect LDCs to pay for assistance pro-
vided under credits. Aid recipients, on the other
hand, are eager to meet their obligations so as not
to impair their credit-worthiness in international
markets. This publication compares the debt manage-
ment and financial benefits to the LDCs of the eco-
nomic aid provided by Western and Communist nations.
It also compares Western and Communist efforts to
cope with a dwindling margin between new economic
aid and debt service on old programs.
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Gross Capital Flows to the LDCs
5. During 1954-72 the LDCs received about $113
billion in economic assistance from bilateral official
sources in the developed world.* An estimated $107
billion came from the West** and only about $6 billion
from Communist nations. Aid disbursements rose rapidly
in the early years, climbing from an annual average of
less than $3 billion during 1954-59 to almost $6 bil-
lion during the next five years. During 1965-69, aid
outlays rose less rapidly because of relatively stable
US disbursements. But, in 1970-71, deliveries rose
by about 25g and approached a record $10 billion a
year.*** Although complete data for Western expendi-
tures are not yet available for 1972, it is certain
that they surpassed 1971 levels.
6. The recently expanded flow of capital re-
flects the rapid growth of disbursements by Western
Europe and Japan. Increases in US aid have been
small. US participation in the global flow totaled
$4 billion in 1971, 40$ of the total. This was a
drop from an average annual contribution of about
55o prior to 1970. The Communist countries' annual
contribution to the global flow has been relatively
constant since 1965 -- ranging between 6a and 7%.
Their $6 billion in aid deliveries was only about 10~
as large as US aid deliveries of over $55 billion and
40~ as large as the $15 billion provided by France,
the second largest Western donor. Combined disburse-
ments of the eight Communist nations were less than
those of either the United Kingdom, Japan, or West Ger-
many .
* Excluding private flows and multilateral assistance,
which have totaled about $80 billion.
** Throughout this publication the term West refers
to members of the Development Assistance Committee
(DAC) -- Australia, Austria, Belgium, Canada, Den-
mark, France, Italy, Japan, the Netherlands, Norway,
Portugal, Sweden, Switzerland, the United Kingdom,
the United States, and West Germany.
***In addition, private gross flows, which have
accounted for the greater part of the capital ex-
pansion flowing to LDCs in recent years, increased
to $12 billion in 1971, up from $5 billion in 1965.
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The Cost of Capital
7. Payments of principal and interest on aid
from all bilateral official sources have absorbed
about 20~ of the total assistance provided. By 1970-71
these payments were about 30$ of the annual total.
For some recipients, the ratio was even higher, and
for a few a reverse flow of resources was being gene-
rated, sometimes on both Communist and Western aid
accounts, In the aggregate, LDC debt service has con-
sumed a larger share of Communist than of Western aid.
Principal and interest payments for Communist aid were
some 30~ of the total value of Communist aid deliveries.
The ratio for Western aid was less than 20$. By 1971
almost one~half of Communist aid deliveries went for
debt service. In contrast, repayments of LDC principal
debt and interest to Western nations was absorbing
only about 25~ of the aid flow in 1971.
8. At the end of 1972, Third World nations
had paid an estimated $21 billion ($14 billion for
principal and $7 billion for interest) on their
bilateral official debt. About $19 billion of the
total went to Western nations and the remainder to
the Communist countries (see the table). While both
principal and interest payments moved consistently
upward, especially since the mid-1960s, principal
payments had grown faster. These accounted far 70~
of total debt service in 1971, compared with about
60~ in 1965. Increases in recent years reflect the
onset of payments following the expiration of grace
periods and the somewhat shorter repayment periods
allowed on many new undertakings,
9. Service of the LDC debt for official bilat-
eral economic assistance more than doubled between
1965 and 1972. Repayments of principal and interest
in 1972 approached $3 billion,* compared with only
slightly mare than $1 billion seven years earlier.
This means that debt servicing has grown as fast as
the debt itself but much faster than aid receipts,
which rose less than 50~ between 1965 and 1971.
Additional-estimated payments due for private capi~
tal debt and dividends payments were roughly $3.5 bil~-
lion in 1971.
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Estimated LDC Debt Payments
for Official Bilateral Economic Aid, by Donor
1957-72 1/
Million Current US $
Total
Principal
Interest
Total
21,300
14,300
7,000
Western countries
19,300
12,800 2/
6,500 3/
United States
10,500
6,750
3,750
Other ~
8,800
6,050
2,750
Communist countries
2,000
1,500
500
1. Data for 1972 are preliminary.
2. Excluding possibly as much as $1 billion of
principal payments to governments that are not DAC
members.
3. Including estimates of interest paid to DAC
countries for 1957-67.
10. On the average, LDC repayments to Communist
creditors have grown somewhat faster than to Western
creditors, but the relative share of Communist
creditors in the total repaid has not changed signif-
icantly over the past decade. Between 1965 and
1972, LDC debt. service on Communist aid tripled;
it more than doubled for Western aid. Never-
theless, at the end of 1972 the LDCs still owed
Communist nations about $4 billion, representing
about two-thirds of total Communist aid delivered
since the beginning of 1954. Their debt to the West
was approximately $46 billion, or less than 45~
of total Western aid deliveries. Because of a
much higher grant element in Western aid, the debt
service per dollar of Communist aid delivered has
been more than one and one-half times as high as
for Western aid. The debt service/delivery ratio
for Communist aid is about 300, compared with
about 20~ for Western aid. Although Communist
countries have provided only about 50 of the
official bilateral capital that has flowed to LDCs,
they have claimed almost twice that share of the
total repaid on aid accounts.
5
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11. Amortization of the LDC debt to Communist
countries also has proceeded at a higher rate than
on LDC debt to the West, while interest as a
share of the total repaid dropped somewhat on both
Eastern and Western accounts in recent years.
Interest has constituted a larger share of LDC
repayments for Western aid (about one-third) be-
cause of higher average charges and longer grace
and amortization periods for Western official loan
capital. Interest payments for Communist aid have
accounted for about one--fourth of the total repaid.
Nevertheless, the cost per dollar of aid provided was
less for Western than for Communist aid. This was
mostly because of the more favorable Western terms.
More than one-half of aid committed by Western nations
and 45~ of their deliveries have been grant aid.*
Communist nations provided less than 5~ of their total
aid as outright grants, although, as a share of deliv-
eries, grant aid was about 10~. In 1971, Western aid
commitments allowed amortization over an average of
28.7 years, after an average grace period of 6.5
years. Communist commitments carried an average
of 11.5 years for amortization.** Average interest
rates for Communist aid have been lower than for
Western aid. Communist aid extended in 1971
carried interest charges averaging less than 2%,
compared with 2.8o for Western commitments. Never-
theless, during 1965-72, interest payments to
Western nations equaled 80 of the total value
of their aid deliveries; it was 100 of Communist
deliveries.
T e United States, France, and the United Kingdom
together provided more than 80~ of the total grants.
All Australian aid is grant aid.
** Grace periods for Communist aid cannot be com-
pared with those for Western assistance because of
definitional problems, except for the PRC which
usually allows a 5-20 year lag between commitments
and the onset of payments. Moscow normally requires
initial principal payments one year after project
completion, which may mean a delay in principal
payments by 2-15 or more years after actual commit-
ments are made.
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12. At the end of 1972, the LDCs still owed
an estimated $50 billion to other governments for
bilateral economic aid deliveries,* more than
three times principal payments already made. LDC
outstanding debt had reached more than $20 billion
at the end of 1964, and then during 1965-6$ it nearly
doubled. Debt rose somewhat more slowly over the
next four years (1969-72), but at the end of 1972 it
was two and one-half times the level at the end of
1964.
13. LDC debt to-the West grew at a somewhat
higher rate than debt to Communist nations, but
the relationship between deliveries and outstanding
debt has been more favorable for Western than Com-
munist aid. Thus, in spite of the failure of Com-
munist aid deliveries to grow as part of the total
and in spite of the faster pay-off on LDC aid debt
to Communist nations, the LDCs still owed Communist
countries an estimated $4 billion at the end of
1972.
Net Aid Transfer: The Critical Factor
14. The size of a nation's debt is not
necessarily a measure of strains on its economy,
nor is the size of its debt service ratio.** Prob-
lems usually occur when the debtor cannot settle
trade and aid accounts because debt servicing is
encroaching on its import capacity. Thus, because
of variations in domestic economic conditions, LDCs
have sought .debt relief at very different stages
of indebtedness and at different debt service
ratios. Generally, their problems reflect a com-
bination of external and domestic factors that
surface when debtors' foreign exchange availabilities
are not adequate to honor external obligations or
if, by honoring them, domestic development objectives
are jeopardized.
* Private and privately guaranteed debt would
probably add as much as $40 billion to $50 billion
to this total. An additional $10 billion to $15
billion also may be outstanding for military aid
deliveries.
** The ratio between total debt service and total
export earnings.
7"
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15. In accepting long-term repayment responsibi-
lities, aid recipients weigh future liabilities
against the contributions of additional foreign
capital inputs to tkieir domestic growth. Critical
to the cast-benefit judgment, particularly as a
short-run consideration, is net resource availability
(i.e. gross aid deliveries, net of principal and
interest). Because the actual net transfer of re-
sources is a function of the size and terms of
grass capital flows, it is an important criterion
for judging relative benefits among aid programs.
16. The failure of capital flows to expand
sufficiently to compensate for the more rapidly
growing debt service has led to an overall dete-
rioration in the expansion of net aid transferred
over time. Even though gross capital flows to the
Third World from official bilateral sources have
been increasing in the past few years, the rate
of increase, net of debt service, has decelerated,
and net availabilities from some donors have
dropped. Even the 15$ increase in net official
bilateral capital transfers during 1971 was con-
siderably less than an effective addition to LDC
capital availability because of inflation. Never-
theless, net aid transfers from the West have con-
tinued to grow. Since the beginning of 1965,
those from Communist nations have fallen (see
the chart). The divergence in the net transfer
patterns between Communist and Western aid pro-
grams probably is the most important difference
to have emerged between the two programs. It is
the result of the much larger growth in gross
flows from Western nations as well as qualitative
differences in Western and Eastern programs.
One of the most important factors responsible for
the difference is the high grant element of
Western aid (82~ for commitments made in 1971).*
Under the most liberal interpretation of current
Communist aid terms, the grant element would be no
more than 35$-40$.
* The grant element measures the concessionary element
of aid terms. It is derived by relating the present
value of interest, principal payments, and the length
of the grace period.
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NET TRANSFER OF OFFICIAL BILATERAL CAPITAL
TO LESS DEVELOPED COUNTRIES
MILLION CURRENT US$
10,000 ,~-.--.__~_
1984. 86 86 70 72
'More then $7 billion of grant-like flows Aeve not PRELIMINARY
been included.
FROM COMMUNIST COUNTRIES
MILLION CURRENT US$
USSfl AND EASTERN EUROPE:
NET TRANSFER
OELIVEAIE9
FROM THE
USSA ANU
EAETEAN
EUAOPE
?!STERN. EUROPE
>
1984 86 08 70
"About $15 m!llion a1 principelpeyments came out
of tbis (/uw.
17. Net aid receipts from the West have grown
in almost every year since 1954. They rose rapidly
during the first decade of the aid program (1954-63)
because of sharply expanding aid deliveries and
large amounts of grant aid. Then, between 1964 and
1969 deliveries leveled off. More concessionary
terms of aid and debt relief continued to provide some
growth in receipts. Larger gross flows in 1970-72
again contributed to a continuing increase in
Western net aid transfers. Meanwhile, the net
flow of Communist aid had fallen in half between 1964
and 1972. The decline was noted in every year until
1971, when unusually large Chinese aid deliveries,
made before large repayments on Chinese aid fell due,
drove the net up somewhat. If Chinese aid deliveries
are excluded from the Communist total, the narrowing
gap between deliveries and repayments is even more
pronounced. Unless there is a marked change in Com-
munist aid policy, the net flow will fall to zero and
then become negative in the next several years.
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Impact of Debt Service on the LDCs
18. Debt service on all LDC accounts* was
equivalent to about 15~ of total merchandise exports
from these nations in 1971, slightly higher than in
1966. The ratio is higher for some countries and
groups of countries. For example, it was 25o for
South Asia because debt payments more than doubled
while merchandise exports increased by only 200
between 1965 and 1971. In the aggregate, the ratio
of debt service to total merchandise exports** for
Communist and Western official bilateral aid was
roughly the same, but the ratio was far higher for
the USSR than for the United States. Soviet debt
service as a percent of LDC merchandise exports
has run about twice as large as for the United
States.*** During 1969-71, about 30~ of total mer~
chandise exports from Soviet aid clients was devoted
to repayment of their aid debt to the USSR. During
the same period, LDC repayments to the United States
ranged between 10~ and 15o of the total exports of
LDCs that had received credits from the United States.
In 1966 the ratio for the United States was 10~, com-
pared with 25~ for the USSR.
19. These ratios for Communist and Western
countries may not be exactly comparable for mea-
suring LDC ability to repay debts. Communist
aid may be easier to repay than Western aid because
of the "means of repayment." Most Western aid is
tied to purchases in the donor country, but repay-
ment of principal and interest is in free foreign
exchange. Communist aid also is "tied," but re-
payment is in local goods. Commodities used as
repayment for LDC debts to Communist creditors
would be equivalent to hard currency payments if
they could be sold for hard currency, but frequently
these goods cannot be disposed of, because of their
inferior quality, a lack of demand, or other barriers
* Based on data for 80 LDCs-and includin
g private
and privately guaranteed debt servicing as well as
multilateral global debt service.
** Merchandise exports are used for comparing Western
and Communist ratios because export earnings data
are not readily available for the latter nations.
***Includes only the LDCs that were in debt to the
US and USSR in 1971.
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in developed country markets. Communist willing-
ness to accept cheap consumer goods from Egypt
and India, foods from African nations, and crude
products and-raw materials not salable on world
markets allows LDCs to pay their debt without
creating pressures on limited foreign exchange re-
serves and hard currency earnings. It enables them
to exchange otherwise surplus goods for development
capital. Meanwhile, the demand for these goods
generates domestic employment. Of particular
advantage to the LDCs is the willingness of Com-
munist nations to accept as repayment the output
of plants built with Soviet aid, for which at least
initially there may be no ready market. The weight
of this repayment consideration differs among
recipients, but it may be critical to the decision
to accept Communist aid on what appears to be more
burdensome terms than for Western aid: Iran's
natural gas, previously flared as a waste product,
is now paying for most of the annual flow of Soviet
capital to Iran. Other Soviet-aided projects --
natural gas from Afghanistan, bauxite from Guinea,
and alumina from Turkey -- will pay for Soviet aid.
Steel rails from Tndia and Soviet use of port facil-
ities in Berbera, Somalia, also fall into this cate-
gory.
Debt Relief
20. Debtor nations rarely have defaulted by
outright refusal to honor their debts, and they
have sought relief only as a last resort. Western
and Communist creditors, although they both have
been willing to renegotiate LDC repayment schedules
where a real need has existed, have refused to pro-
vide automatic relief. Tn a Pravda article of
29 March 1973, Skachkov, Chairman of the State
Committee of the USSR Council of Ministers for
Foreign Economic Relations, stated: "Soviet
economic assistance is not charity. It is given on
a mutually advantageous basis and rests on the
principles of equality and respect for mutual
interest."
21. Both Western and Communist countries have
given relief where there have been acute debt servic-
ing problems.
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22. Debt relief may take any of the following
forms: (1) cancellation of the debt, (2) reschedul-
ing of payments, or (3) refinancing the debt. Western
nations are not known to have canceled principal
payments although occasionally they have forgiven
interest payments due. On a very few occasions,
Communist countries have converted loans to grants.*
Occasionally they have canceled interest payments.
Debt rescheduling -- a rearrangement of maturities
to eliminate a bulge in debt servicing -- is the
most widely used form of relief provided by both
Western and Communist creditors. The third form
of relief -- refinancing (most commonly used by
Western nations) -- implies a debt rollover in which
new credits are extended to equal principal pay-
ments due on, the outstanding debt. This relief
implies that financed investments yield enough to
pay the interest due. Sometimes debt rollover is
combined with a rescheduling of maturities. Re-
financing is not known to have been used directly
as a relief device by Communist nations, although
in some cases the resulting flow pattern after a
rescheduling may effect a rollover.
23. Most major debt renegotiations with the
West are conducted through multilateral channels,
which create a procedural framework within which
individual creditor nations effect bilateral settle-
ments. These multilateral arrangements started in
1955 and 1956 to deal with large commercial arrear-
ages accumulated by Brazil and Argentina with their
West European trading partners. Broad rescheduling
negotiations currently are under way among Western
consortia with Chile, Ghana, India, and Pakistan.
Communist countries usually have provided debt re-
lief bilaterally, but often the East European nations
follow Moscow's format. The renegotiation of
Indonesia's debt to Communist nations was signifi-
cant because most of the Communist creditors
followed the Western accord.
* China's conversion to grants of $100 million of
credits extended in 1964 and 1968 to Pakistan-Bang-
ladesh is the most recent example.
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Outlook
24. The pressure of debt servicing on LDC re-
sources will become more burdensome in the latter
half of the 1970s. Long grace periods, which have
begun to expire, on loans granted earlier; the de-
cline in the amount of grant aid sometimes offset
by a higher volume of lending; and less concessional
terms by some major lenders all will contribute to a
continuing rapid rise in debt service. Even if debt
service were to grow only as fast in the next five
years as it did in the last five, by 1977 LDCs
would have to make approximately $6 billion in in-
terest and principal payments. To sustain the
amount of net aid transferred in 1972, and assuming
the same concessional terms, the gross capital flow
would have to be increased by about 30 0 . Neverthe-
less, as LDC import requirements grow and debt ser-
vice rises, more of the LDCs will be forced to seek
relief, and further accommodation to their hard
currency shortages may have to be made. Western
nations have recognized the relationship between
debt relief and the conditions of aid. Communist
nations have not, although they are more circum-
spect in their aid undertakings than before. Com-
munist nations will continue to stress the "mutuality
of interest," and so long as local goods are in
surplus but acceptable as repayment for Communist
aid, the burden on LDCs of making these repayments
will be less than for Western aid. Thus the "means
of repayment" probably will continue to condition
the acceptability of further Communist aid in spite
of the heavier debt service responsibilities and a
probable negative flow of aid. Western nations will
have to continue to accommodate to the problems re-
lated to limited LDC foreign exchange availabilities
and the erosion of aid availabilities for develop-
ment. But if Communist nations are unable to absorb
LDC export surpluses (or if LDC goods can be dis-
posed of for hard currency), Moscow and Eastern
Europe may be forced to conform more closely to
optimum aid criteria being pressed on the developed
nations in international councils.
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$e~tez+~ber 1973
LDC DEBT SERVICE BURDEN:
A COMPARISON OF WESTERN AND COMMUNIST PROGRAMS
Summary
1. The dilemma of increasing amounts of de-
velopment assistance to the less developed countries
(LDCs) in the face of rapidly expanding debt service
is forcing a re-examination of the financial cri-
teria for aid giving. Western nations, responsible
for almost 95~ of the gross bilateral flow of
official capital to LDCs during 1954-72, are re-
sponding to international pressures to obtain uni-
form aid procedures. Communist countries are not.
This situation exists in spite of the less favor-
able terms for Communist aid:
Communist aid has a smaller grant
element than Western aid; it is paid off
faster and absorbs a larger share of the
annual gross capital flow; the cost per
dollar of Communist aid delivered is
higher than for Western aid; and Com-
munist deliveries, net of payments for
principal and interest, are declining
while net Western aid transfers still
are rising. The significant financial
advantage of Communist aid is that
it can be repaid in commodities (often
not salable elsewhere) instead of hard
currency. For some LDCs, this may mean
the disposal of surplus goods for capital
that will enhance development and generate
employment.
2. Creditor nations expect the LDCs to meet
repayment obligations and have provided debt relief
only as a last resort. At the end of 1972 the LDCs
had made principal and interest payments totaling
about US $21 billion for the almost $115 billion of
official bilateral capital provided them since the
beginning of 1954. Still outstanding was some $50
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billion in debts. If repayment of the LDC debt
were to increase as rapidly over the next five years
as during the past five, annual debt service would
rise to about $6 billion in 1977, or twice the 1972
level. To sustain current net aid tranfers in 1977,
official bilateral capital flows would have to in-
crease by about 30~ to more than $13 billion.
Discussion
Introduction
3. The nations of the Third World are trying
to acquire increasing external capital assistance
at a time when their rising foreign debt service
is burdensome. Both Western and Communist donors
are pressed to expand their aid undertakings on
more concessionary terms, sometimes to countries
that are not able to discharge current obligations
or whose debt service is absorbing an inordinate
amount of the capital inflow. Anxious to strengthen
their political and economic relationships with the
LDCs, both are seeking solutions to the debt ser-
vice problem that will allow debtors to sustain de-
velopment efforts without severely impairing their
import capability.
4. A continuing increase in the net capital
flow to LDCs implies a major expansion of gross
disbursements, additional softening of repayment"
terms, or relief from current debt obligations.
Each expedient has been employed, often in combina-
tion, but consistent long-term approaches to the
problem have only recently begun to emerge. In
spite of these problems, both Eastern and Western
creditors expect LDCs to pay for assistance pro-
vided under credits. Aid recipients, on the other
hand, are eager to meet their obligations so as not
to impair their credit-worthiness in international
markets. This publication compares the debt manage-
ment and financial benefits to the LDCs of the eco-
nomic aid provided by Western and Communist nations.
It also compares Western and Communist efforts to
cope with a dwindling margin between new economic
aid and debt service on old programs.
2
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billion in debts. If repayment of the LDC debt
were to increase as rapidly over the next five years
as during the past five, annual debt service would
rise to about $6 billion in 1977, or twice the 1972
level. To sustain current net aid tranfers in 1977,
offiSeab b aboutr30~ctolmorefthan $131billionto in-
crea y
Discussion
Introduction
3. The nations of the Third World are trying
to acquire increasing external capital assistance
at a time when their rising foreign debt service
is burdensome. Both Western and Communist donors
are pressed to expand their aid undertakings on
more concessionary terms, sometimes to countries
that are not able to discharge current obligations
or whose debt service is absorbing an inordinate
amount of the capital inflow. Anxious to strengthen
their political and economic relationships with the
LDCs, both are seeking solutions to the debt ser-
vice problem that will allow debtors to sustain de-
velopment efforts without severely impairing their
import capability.
4. A continuing increase in the net caPossl
flow to LDCs implies a major expansion of g ment
disbursements, additional softening of repay
terms, or relief from current debt obligations.
Each expedient has been empeomea' roachesnto mtbhena-
tion, but consistent long- PP
problem have only recently begun to emerge. In
spite of these problems, both Eastern and Western
creditors expect LDCs to pay for assistance pro-
vided under credits. Aid recipients, on the other
hand, are eager to meet their obligations so as not
to impair their credit-worthiness in international
markets. This publication compares the debt manage-
ment and financial benefits to the LDCs of the eco-
nomic aid provided by Western and Communist nations.
It also compares Western and Communist efforts to
cope with a dwindling margin between new economic
aid and debt service on old programs.
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Gross Capital Flows to the LDCs
5. During 1954-72 the LDCs received about $113
billion in economic assistance from bilateral official
sources in the developed world.* An estimated $107
billion came from the West** and only about $6 billion
from Communist nations. Aid disbursements rose rapidly
in the early years, climbing from an annual average of
less than $3 billion during 1954-59 to almost $6 bil-
lion during the next five years. During 1965-69, aid
outlays rose less rapidly because of relatively stable
US disbursements. But, in 1970-71, deliveries rose
by about 25~ and approached a record $10 billion a
year.*** Although complete data for Western expendi-
tures are-not yet available for 1972, it is certain
that they surpassed 1971 levels.
6. The recently expanded flow of capital re-
fleets the rapid growth of disbursements by Western
Europe and Japan. Increases in US aid have been
small. US participation in the global flow totaled
$4 billion in 1971, 40~ of the fatal. This was a
drop from an average annual contribution of about
55~ prior to 1970. The Communist countries' annual
contribution to the global flow has been relatively
constant since 1965 -- ranging between 6o and 70.
Their $6 billion in aid deliveries was only about 10~
as large as US aid deliveries of over $55 billion and
40~ as large as the $15 billion provided by France,
the second largest Western donor. Combined disburse-
ments of the eight Communist nations were less than
those of either the United Kingdom, Japan, or West Ger-
many .
* Excluding private flows and multilateral assistance,
which have totaled about $80 billion.
** Throughout this publication the term West refers
to members of the Development Assistance Committee
(DAC) -- Australia, Austria, Belgium, Canada, Den-
mark, France, Italy, Japan, the Netherlands, Norway,
Portugal, Sweden, Switzerland, the United Kingdom,
the United States, and West Germany.
***In addition, private gross flows, which have
accounted for the greater part of the capital ex-
pansion flowing to LDCs in recent years, increased
to $12 billion in 1971, up from $5 billion in 1965.
3
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The Cost of Capital
7. Payments of principal and interest on aid
from all bilateral official sources have absorbed
about 20~ of the total assistance provided. By 1970-71
these payments were about 30~ of .the annual total.
For some recipients, the ratio was even higher, and
for a few a reverse flow of resources was being gene-
rated, sometimes on both Communist and Western aid
accounts. In the aggregate, LDC debt service has con-
sumed a larger share of Communist than of Western aid.
Principal and interest payments for Communist aid were
some 30~ of the total value of Communist aid deliveries,
The ratio for Western aid was less than 20~. By 1971
almost one--half of Communist aid deliveries went for
debt service. Tn contrast, repayments of LDC principal
debt and interest to Western nations was absorbing
only about 25% of the aid flow in 1971.
8. At the end of 1972, Third World nations
had paid an estimated $21 billion ($14 billion for
principal and $7 billion for interest) on their
bilateral official debt. About $19 billion of the
total went to Western nations and the remainder to
the Communist countries (see the table). While both
principal and interest payments moved consistently
upward, especially since the mid~1960s, principal
payments had grown faster. These accounted for 70~
of total debt service in 1971, compared with about
60~ in 1965. Increases in recent years reflect the
onset of payments following the expiration of grace
periods and the somewhat shorter repayment periods
allowed on many new undertakings.
9. Service of the LDC debt for official bilat-
eral economic assistance more than doubled between
1965 and 1972. Repayments of principal and interest
in 1972 approached $3 billion,* compared with only
slightly more than $1 billion seven years earlier.
This means that debt servicing has grown as fast as
the debt itself but much faster than aid receipts,
which rose less than 50~ between 1965 and 1971.
Additional estimated payments due for private capi--
ta1 debt and dividends payments were roughly $3.5 bil-
lion in 1971.
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Estimated LDC Debt Payments
for Official Bilateral Economic Aid, by Donor
1957-72 1/
Million Current US $
Total
Principal
Interest
To~aZ
21, 300
14, 300
7, 000
Western countries
19,300
12,800 2/
6,500 3/
United States
10,500
6,750
3,750
Other
8,800
6,050
2,750
Communist countries
2,000
1,500
500
1. Data for 1972 are prelimnary.-
2. Excluding possibly as much as $1 billion of
principal payments to governments that are not DAC
members .
3. Including estimates of interest paid to DAC
countries for 1957-67.
10. On the average, LDC repayments to Communist
creditors have grown somewhat faster than to Western
creditors, but the relative share of Communist
creditors in the total repaid has not changed signif-
icantly over the past decade. Between 1965 and
1972, LDC. debt service on Communist aid tripled;
it more than doubled for Western aid. Never-
theless, at the end of 1972 the LDCs still owed
Communist nations about $4 billion, representing
about two-thirds of total Communist aid delivered
since the beginning of 1954. Their debt to the West
was approximately $46 billion, or less than 45%
of total Western aid deliveries. Because of a
much higher grant element in Western aid, the debt
service per dollar of Communist aici delivered has
been more than one and one-half times as high as
for Western aid. The debt service/delivery ratio
for Communist aid is about 300, compared with
about 20~ for Western aid. Although Communist
countries have provided only about 5% of the
official bilateral capital that has flowed to LDCs,
they have claimed almost twice that share of the
total repaid on aid accounts.
5
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11. Amortization of the LDC debt to Communist
countries also has proceeded at a higher rate than
on LDC debt to the West, while interest as a
share of the total repaid dropped somewhat on both
Eastern and Western accounts in recent years.
Interest has constituted a larger share of LDC
repayments for Western aid (about one-third) be-
cause of higher average charges and longer grace
and amortization periods for Western official loan
capital. Interest payments for Communist aid have
accounted for about one--fourth of the total repaid.
Nevertheless, the cost per dollar of aid provided was
less for Western than for Communist aid. This was
mostly because of the more favorable Western terms.
More than one-half of aid committed by Western nations
and 45~ of their deliveries have been grant aid.*
Communist nations provided less than 50 of their total
aid as outright grants, although, as a share of deliv-
eries, grant aid was about 10~. In 1971, Western aid
commitments allowed amortization over an average of
28.7 years, after an average grace period of 6.5
years. Communist commitments carried an average
of 11.5 years for amortization.** Average interest
rates for Communist aid have been lower than for
Western aid. Communist aid extended in 1971
carried interest charges averaging less than 2~,
compared with 2.8~ for Western commitments. Never-
theless, during 1965-72, interest payments to
.Western nations equaled 8% of the total value
of their aid deliveries; it was 100 of Communist
deliveries.
T e United States, France, and the United Kingdom
together provided more than 80~ of the total grants.
All Australian aid is grant aid.
** Grace periods for Communist aid cannot be com-
pared with those for Western assistance because of
definitional problems, except for the PRC which
usually allows a 5-20 year lag between commitments
and the onset of payments. Moscow normally requires
initial principal payments one year after project
completion, which may mean a delay in principal
payments by 2-15 or more years after actual commit-
ments are made.
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The Size of LDC Debt
12. At the end of 1972, the LDCs still owed
an estimated $50 billion to other governments for
bilateral economic aid deliveries,* more than
three times principal payments already made. LDC
outstanding debt had reached mare than $20 billion
at the end of 1964, and then during 1965-68 it nearly
doubled. Debt rose somewhat more slowly over the
next four years (1969-72), but at the end of 1972 it
was two and one-half times the level at the end of
1964.
13. LDC debt to the West grew at a somewhat
higher rate than debt to Communist nations, but
the relationship between deliveries and outstanding
debt has been more favorable for Western than Com-
munist aid. Thus, in spite of the failure of Com-
munist aid deliveries to grow as part of the total
and in spite of the faster pay-off on LDC aid debt
to Communist nations, the LDCs still owed Communist
countries an estimated $4 billion at the end of
1972.
Net Aid Transfer: The Critical Factor
14. The size of a nation's debt is not
necessarily a measure of strains on its economy,
nor is the size of its debt service ratio.** Prob-
lems usually occur when the debtor cannot settle
trade and aid accounts because debt servicing is
encroaching on its import capacity. Thus, because
of variations in domestic economic conditions, LDCs
have sought debt relief at very different stages
of indebtedness and at different debt service
ratios. Generally, their problems reflect a com-
bination of external and domestic factors that
surface when debtors' foreign excYiange availabilities
are not adequate to honor external obligations or
if, by honoring them, domestic development objectives
are jeopardized.
* Private and privately guaranteed debt would
probably add as much as $40 billion to $50 billion
to this total. An additional $10 billion to $15
billion also may be outstanding for military aid
deliveries.
** The ratio between total debt service and total
export earnings.
7
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15. In accepting long-term repayment responsibi-
lities, aid recipients weigh future liabilities
against the contrib utions of additional foreign
capital inputs to tkieir domestic growtki. Critical
to the cost-benefit judgment, particularly as a
short-run consideration, is net resource availability
(i.e. gross aid deliveries, net of principal and
interest). Because the actual net transfer of re-
sources is a function of the size and terms of
gross capital flows, it is an important criterion
for judging relative benefits among aid programs.
16. The failure of capital flows to expand
sufficiently to compensate for the more rapidly
growing debt service has led to an overall dete-
rioration in tkie expansion of net aid transferred
over time. Even though gross capital flows to the
Third World from official bilateral sources have
been increasing in the past few years, the rate
of increase, net of debt service, has decelerated,
and net availabilities from some donors kiave
dropped. Even the 15~ increase in net official
bilateral capital transfers during 1971 was con-
siderably less than an effective addition to LDC
capital availability because of inflation. Never-
theless, net aid transfers from the West have con-
tinued to grow. Since the beginning of 1965,
those from Communist nations have fallen (see
the chart). The divergence in the net transfer
patterns between Communist and Western aid pro-
grams probably is the most important difference
to have emerged between the two programs. It is
the result of the much larger growth in gross
flows from Western nations as well as qualitative
differences in Western and Eastern programs.
One of the most important factors responsible for
the difference is the high grant element of
Western aid (82$ for commitments made in 1971).*
Under the most liberal interpretation of current
Communist aid terms, the grant element would be no
more than 35$-40~.
* rant element measures the concessionary element
The g relating the present
of aid terms. It isrdnCivaa payments, and the length
value of interest, p p
of the grace period.
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NET TRANSFER OF OFFICIAL BILATERAL CAPITAL
TO LESS DEVELOPED COUNTRIES
FROM WESTERN COUNTRIES
MILLION CURRENT US$
PRC: NET TRANSFER"~
~~_~~.~
USSR AND EASTERN EUROPE:
NET TRANSFER
'Mare then $1 billion of grent~like {lows have not
been included.
"About $l5 million oI principal payments come out
o/ this flow.
OELIVEAIES
FAOM THE
USSfl ANO
EASTERN
EUflOPE
17. Net aid receipts frorn the West have grown
in alrnust every year since 1954. They rose rapidly
during the first decade of the aid program (1954-63)
because of sharply expanding aid deliveries and
large amounts of grant aid. Then, between 1964 and
1969 deliveries leveled off. More concessionary
terms of aid and debt relief continued to provide some
growth in receipts. Larger gross flows in 1970-72
again contributed to a continuing increase in
Western net aid transfers. Meanwhile, the net
flow of Communist aid had fallen in half between 1964
and 1972. The decline was noted in every year until.
1971, when unusually large Chinese aid deliveries,
made before large repayments on Chinese aid fell due,
drove the net up somewhat. If Chinese aid deliveries
are excluded from the Communist total, the narrowing
gap between deliveries and repayments is even more
pronounced. Unless there is a marked change in Com-
munist aid policy, the net flow will fall to zero and
then become negative in the next several years.
9
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Impact of Debt Service on the LDCs
18. Debt service on all LDC accounts* was
equivalent to about 15$ of total merchandise exports
from these nations in 1971, slightly higher than in
1966. The ratio is higher for some countries and
groups of countries. For example, it was 25~ for
South Asia because debt payments more than doubled
while merchandise exports increased by only 20~
between 1965 and 1971. In the aggregate, the ratio
of debt service to total merchandise exports** for
Communist and Western official bilateral aid was
roughly the same, but the ratio was far higher for
the USSR than for the United States. Soviet debt
service as a percent of LDC merchandise exports
has run about twice as large as for the United
States.*** During 1969--71, about 30~ of total mer-
chandise exports from Soviet aid clients was devoted
to repayment of their aid debt to the USSR. During
the same period, LDC repayments to the United States
ranged between 10~ and 15$ of the total exports of
LDCs that had received credits from the United States.
In 1966 the ratio for the United States was 10~, com-
pared with 25~ for the USSR.
19. These ratios for Communist and Western
countries may not be exactly comparable for mea-
suring LDC ability to repay debts. Communist
aid may be easier to repay than Western aid because
of the "means of repayment." Most Western aid is
tied to purchases in the donor country, but repay-
ment of principal and interest is in free foreign
exchange. Communist aid also is "tied," but re-
payment is in local goods. Commodities used as
repayment for LDC debts to Communist creditors
would be equivalent to hard currency payments if
they could be sold for hard currency, but frequently
these goods cannot be disposed of, because of their
inferior quality, a lack of demand, or other barriers
* Based on data for 80 LDCs and including private
and privately guaranteed debt servicing as well as
multilateral global debt service.
** Merchandise exports are used for comparing Western
and Communist ratios because export earnings data
are not readily available for the latter nations.
***Includes only the LDCs that were in debt to the
US and USSR in 1971.
10
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in developed country markets. Communist willing-
ness to accept cheap consumer goods from Egypt
and India, foods from African nations, and crude
products and raw materials not salable on world
markets allows LDCs to pay their debt without
creating pressures on limited foreign exchange re-
serves and hard currency earnings. It enables them
to exchange otherwise surplus goods for development
capital. Meanwhile, the demand for these goods
generates domestic employment. Of particular
advantage to the LDCs is the willingness of Com-
munist nations to accept as repayment the output
of plants built with Soviet aid, for which at least
initially there may be no ready market. The weight
of this repayment consideration differs among
recipients, but it may be critical to the decision
to accept Communist aid on what appears to be more
burdensome terms than for Western aid: Iran's
natural gas, previously flared as a waste product,
is now paying far most of the annual flow of Soviet
capital to Iran. Other Soviet-aided projects --
natural gas from Afghanistan, bauxite from Guinea,
and alumina from Turkey -- will pay for Soviet aid.
Steel rails from India and Soviet use of port facil-
ities in Berbera, Somalia, also fall into this cate-
gory.
Debt Relief
20. Debtor nations rarely have defaulted by
outright refusal to honor their debts, and they
have sought relief only as a last resort. Western
and Communist creditors, although they both have
been willing to renegotiate LDC repayment schedules
where a real need has existed, have refused to pro-
vide automatic relief. Tn a Pravda article of
29 March 1973, Skachkov, Chairman of the State
Committee of the USSR Council of Ministers for
Foreign Economic Relations, stated: "Soviet
economic assistance is not charity. It is given on
a mutually advantageous basis and rests on the
principles of equality and respect for mutual
interest."
21. Both Western and Communist countries have
given relief where there have been acute debt servic-
ing problems.
11
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22. Debt relief may take any of the following
forms: (1) cancellation of the debt, (2) reschedul-
ing of payments, or (3) refinancing the debt. Western
nations are not known to have canceled principal
payments although occasionally they have forgiven
interest payments due. On a very few occasions,
Communist countries have converted loans to grants.*
Occasionally they have canceled interest payments.
Debt rescheduling -- a rearrangement of maturities
to eliminate a bulge in debt servicing -- is the
most widely used form of relief provided by both
Western and Communist creditors. The third form
of relief -- refinancing (most commonly used by
Western nations) -- implies a debt rollover in which
new credits are extended to equal principal pay-
ments due on, the outstanding debt. This relief
implies that financed investments yield enough to
pay the interest due. Sometimes debt rollover is
combined with a rescheduling of maturities. Re-
financing is not known to have been used directly
as a relief device by Communist nations, although
in some cases the resulting flow pattern after a
rescheduling may effect a rollover.
23. Most major debt renegotiations with the
West are conducted through multilateral channels,
which create a procedural framework within which
individual creditor nations effect bilateral settle-
ments. These multilateral arrangements started in
1955 and 1956 to deal with large commercial arrear--
ages accumulated by Brazil and Argentina with their
West European trading partners. Braad rescheduling
negotiations currently are under way among Western
consortia with Chile, Ghana, India, and Pakistan.
Communist countries usually have provided debt re-
lief bilaterally, but often the East European nations
follow Moscow's format. The renegotiation of
Indonesia's debt to Communist nations was signifi-
cant because most of the Communist creditors
followed the Western accord.
* China's conversion to grants of $100 million of
credits extended in 1964 and 1968 to Pakistan-Bang-
ladesh is the most recent example.
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24. The pressure of debt servicing on LDC re-
sources will become more burdensome in the latter
half of the 1970x. Long grace periods, which have
begun to expire, on loans granted earlier; the de-
cline in the amount of grant aid sometimes offset
by a higher volume of lending; and less concessional
terms by some major lenders all will contribute to a
continuing rapid rise in debt service. Even if debt
service were to grow only as fast in the next five
years as it did in the last five, by 1977 LDCs
would have to make approximately $6 billion in ~.n-
terest and principal payments. To sustain the
amount of net aid transferred in 1972, and assuming
the same concessional terms, the gross capital flow
would have to be increased by about 300. Neverthe-
less, as LDC impart requirements grow and debt ser-
vice rises, more of the LDCs will be forced to seek
relief, and further accommodation to their hard
currency shortages may have to be made. Western
nations have recognized the relationship between
debt relief and the conditions of aid. Communist
nations have not, although they are more circum-
spect in their aid undertakings than before. Com-
munist nations will continue to stress the "mutuality
of interest," and so long as local goods are in
surplus but acceptable as repayment for Communist
aid, the burden on LDCs of making these repayments
will be less than for Western aid. Thus the "means
of r~:payment" probably will continue to condition
the acceptability of further Communist aid in spite
of the heavier debt service responsibilities and a
probable negative flow of aid. Western nations will
have to continue to accommodate to the problems re-
lated to limited LDC :Foreign exchange availabilities
and the erosion of aid availabilities for develop-
ment.. But if Communist nations are unable to absorb
LDC export surpluses (or if LDC goods can be dis-
posed of for hard currency), Moscow and Eastern
Europe may be forced to conform more closely to
optimum aid criteria being pressed on the developed
nations in international councils.
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No Foreign Dissem
LDC Debt Service Burden: A Comparison
of T~estern and Communist Programs
Secret
ER RP 73-16
September 1973
Copy No . #~ ~~
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 Approved For Release 2000/05/15 :CIA-RDP79T01098A000100160001-8
WARNING
This dfx?ument contains information affecting the national
defcrose of khe United States, within the meaning of Title
18, sections 793 and 794, of the US Code, as amended.
Its transmission or rc?~?clation of its contents to or re-
reipt by an unauthorired person is prohibited by law.
Classified by 015319
Exempt from general
declassification schedule of E.O. 11632
exemption category SB(1),(2),(3)
Automatically declassified on
Data Impossible to Determine
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 Approved For Release 20(~dt1r~~tDP79T01098A000100160001-8
LDC DEBT SERVICE BURDEN:
A COMPARISON OF WESTERN AND COMMUNIST PROGRAMS
Summary
1. The dilemma of increasing amounts of de-
velopment assistance to the less developed countries
(LDCs) in the face of rapidly expanding debt service
is forcing a re-examination of the financial cri-
teria for aid giving. Western nations, responsible
for almost 95~ of the gross bilateral flow of
official capital to LDCs during 1954-72, are re-
sponding to international pressures to obtain uni-
form aid procedures. Communist countries are not.
This situation exists in spite of the less favor-
able terms for Communist aid:
Communist aid has a smaller grant
element than Western aid; it is paid off
faster and absorbs a larger share of the
annual gross capital flow; the cost per
dollar of Communist aid delivered is
higher than for Western aid; and Com-
munist deliveries, net of payments for
principal and interest, are declining
while net Western aid transfers still
are rising. The significant financial
advantage of Communist aid is that
it can be repaid in commodities (often
not salable elsewhere) instead of hard
currency. For some LDCs, this may mean
the disposal of surplus goods for capital
that will enhance development and generate
employment.
2. Creditor nations expect the LDCs to meet
repayment obligations and have provided debt relief
only as a last resort. At the end of 1972 the LDCs
had made principal and interest payments totaling
about US $21 billion for the almost $115 billion of
official bilateral capital provided them since the
beginning of 1954. Still outstanding was some $50
Note: Comments and queries regarding this publica-
tion are welcomed. They may be directed to ~ 25X1A
25X1A of the Office of Economic Research, Code 143,
Extension 6202.
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No Foreign Dissem
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billion in debts. If repayment of the LDC debt
were to increase as rapidly over the next five years
as during the past five, annual debt service would
rise to about $6 billion in 1977, or twice the 1972
level. To sustain current net aid tranfers in 1977,
official bilateral capital flows would have to in-
crease by about 30~ to more than $13 billion.
3. The nations of the Third World are trying
to acquire increasing external capital assistance
at a time when their rising foreign debt service
is burdensome. Both Western and Communist donors
are pressed to expand their aid undertakings on
more concessionary terms, sometimes to countries
that are not able to discharge current obligations
or whose debt service is absorbing an inordinate
amount of the capital inflow. Anxious to strengthen
their political and economic relationships with the
LDCs, both are seeking solutions to the debt ser-
vice problem that will allow debtors to sustain de-
velopment of-forts without severely impairing their
import capability.
4. A continuing increase in the net capital
flow to LDCs implies a major expansion of gross
disbursements, add-itional softening of repayment
terms, or relief from current debt obligations.
Each expedient has been employed, often in combina-
tion, but consistent long-term approaches to the
problem have only recently begun to emerge. In
spite of these problems, both Eastern and Western
creditors expect LDCs to pay for assistance pro-
vided under credits. Aid recipients, on the other
hand, are eager to meet their obligations so as not
to impair their credit-worthiness in international
markets. This publication compares the debt manage-
ment and financial benefits to the LDCs of the eco-
nomic aid provided by Western and Communist nations.
It also compares Western and Communist efforts to
cope with a dwindling margin between new economic
aid and debt service on old programs.
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Gross Capital Flows to the LDCs
5. During 1954-72 the LDCs received about $113
billion in economic assistance from bilateral official
sources .in the developed world.* An estimated $107
billion came from the West** and only slightly more
than $6 billion from Communist nations (see Table
A-1 in the Appendix). Aid disbursements rose
rapidly in the early years, climbing from an annual
average of less than $3 billion during 1954-59 to
almost $6 billion during the next five years. Dur-
ing 1965-69, aid outlays rose less rapidly because
of relatively stable US disbursements. But, in
1970-71, deliveries rose by about 25o and approached
a record $10 billion annually.*** Although complete
data for Western expenditures are not yet available
for 1972, it is certain that they surpassed 1971 levels.
6. The recently expanded flow of capital re-
flects the rapid growth of disbursements by Western
Europe and Japan. Increases in U5 aid have been
small. US participation in the global flow totaled
$4 billion in 1971, 400 of the total. This was a
drop from an average annual contribution of about
55o prior to 1970. The Communist countries' annual
contribution to the global flow has been relatively
constant since 1965 -- ranging between 6% and 70.
Their $6 billion in aid deliveries during 1954-71
was only about 10o as large as US aid deliveries
of $55 billion and 40o as large as the $15 billion
provided by France, the second largest Western donor.
Combined disbursements of the eight Communist nations
were less than those of either the United Kingdom,
Japan, or West Germany.
* Excluding private flows and multilateral assistance,
which have totaled about $80 billion.
** Throughout this publication the term West refers
to members of the Development Assistance Committee
(DAC) -- Australia, Austria, Belgium, Canada, Den-
mark, France, Italy, Japan, the Netherlands, Norway,
Portugal, Sweden, Switzerland, the United Kingdom,
the United States, and West Germany.
***In addition, private gross flows, which have
accounted for the greater part of the capital ex-
pansion flowing to LDCs in recent years, increased
to $12 billion in 1971, up from $5 billion in 1965.
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The Cost of Capital
7. Payments of principal and interest on aid
from all bilateral official sources have absorbed
about 20$ of the total assistance provided since
the beginning of 1954. By 1970-71 these payments
were about 30$ of the annual total. For
some recipients, the ratio was even higher, and
for a few a reverse flow of resources was being
generated, sometimes on both Communist and Western
aid accounts. In the aggregate, LDC debt service
has consumed a larger share of Communist than of
Western aid. During 1954-72, principal and in-
terest payments for Communist aid were some 30$
of the total value of Communist aid deliveries.
The ratio for Western aid was less than 20$. By
1971 the equivalent of about 45~ of Communist
aid deliveries went for debt service; in
197.2 it was 55a. In contrast, repayments of LDC
principal debt and interest to Western nations
was absorbing only about 25~ of the aid flow in
1971.
8. At the end of 1972, Third World nations
had paid an estimated $21 billion ($14 billion for
principal and $7 billion for interest) on their
bilateral official debt. About $19 billion of the
total went to Western nations and the remainder to
the Communist countries (see Table 1). While both
principal and interest payments moved consistently
upward, especially since the mid-1960s, principal
payments had grown faster (see Tab le A-2). These
accounted for 70?s of total debt service in 1971,
compared with about 60$ in 1965. Increases in
recent years reflect the onset of payments follow-
ing the expiration of grace periods and the some-
what shorter repayment periods allowed on many
new undertakings.
9. Service of the LDC debt for official
bilateral economic assistance more than doubled
between 1-965 and 1972. Repayments of principal
and interest in 1 972 approached $3 billion, * com-
pared with about $1.2 billion seven years earlier
(see Table 2). This means that debt servicing
has grown as fast as the debt itself but much
faster than aid receipts, which rose less than 50$
between 1965 and 1971.
* Additional estimated payments due for private capi-
tal debt and dividend payments were roughly $3.5 bil-
lion in 1971.
4
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Estimated LDC Debt Paymentsl
for Official Bilateral Economic Aid, by Donor
1957-722
Total
Priy~cipal
Interest
Total
21,370
14,310
7,060
4
Western countries
19,355
12,8153
6,535
United States
10,500
6,750
3,750
Other
8,850
6,065
2,785
Communist countries
2,015
1,490
525
USSR
1,430
1,05 5
375
Eastern Europe
570
420
150
China
15
15
????
1. Data have been rounded to the neazest $5 million. Because of rounding, components may not add to
the totals shown.
2. Data for 1972 are preliminary.
3. Excluding possibly as much as $1 billion of principal payments to governments that are not DAC
members.
4. Including estimates of interest paid to DAC countries for 1957-67.
Estimated LDC Debt Paymentsl
for Official Bilateral Economic Aid
I. Including principal and interest. Data have been rounded to the nearest $5 million. Because or
rounding, components may not add to the totals shown.
2. Preliminazy.
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10. On the average, LDC repayments to Communist
creditors have grown somewhat faster than to Western
creditors, but the relative share of Communist
creditors in the total repaid has not changed signif-
icantly over the past decade. Between 1965 and
1972, LDC debt service on Communist aid tripled;
it more than doubled for Western aid. Never-
theless, at the end of 1972 the LDCs still owed
Communist nations about $4 billion, representing
about two-thirds of total Communist aid delivered
since the beginning of 1954. Their debt to the West
was approximately $46 billion, ar less than 45$
of total Western aid deliveries. Because of a
much higher grant element in Western aid, the debt
service per dollar. of Communist aid delivered has
been more than one and one-half times as high as
for Western aid. The debt service/delivery ratio
for Communist aid is about 30$, compared with
about 20$ for Western aid. Although Communist
countries have provided only about 5~ of the
official bilateral capital that has flowed to LDCs,
they have claimed almost twice that share of the
total repaid on aid accounts.
11. Amortization of the LDC debt to Communist
countries also has proceeded at a higher rate than
on LDC debt to the West, while interest as a
share of the total repaid dropped somewhat on both
Eastern and Western accounts in recent years.
Interest has constituted a larger. share of LDC
repayments for We-stern aid (about one-third) be-
cause of higher average charges and longer grace
and amortization periods for Western official loan
capital. Interest payments for Communist aid have
accounted for about one-fourth of the total repaid
(see Table A-2). Nevertheless, the cost per dollar
of aid provided was less for Western than for Com-
munist aid. This was mostly because of the more
favorable Western germs. More than one-half of
aid committed by Western nations and 45~ of their
deliveries have been grant aid.* Communist nations
provided less than 5~ of their total aid as out-
right grants, although, as a share of deliveries,
grant aid was about 10~. In 1971, Western aid
* The United States, France, and the United Kingdom
together provided more than 80$ of the total grants
(see Table A-3). All Australian aid is grant aid.
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commitments allowed amortization over an average of
28.7 years, after an average grace period of 6.5
years. Communist commitments carried an average of
11'.5 years for amortization.* Average interest
rates for Communist aid have been lower than for.
Western aid. Communist aid extended in 1971
carried interest charges averaging less than 2~,
compared with 2.8o for Western commitments. Never^
theless, during 196572, interest payments to
Western nations equaled 8% ~~f the total value of
their aid deliveries; it was 10~ of Communist
deliveries.
The Size of LDC Debt
12. At the end of 1972, the LDCs still owed
an estimated $50 billion to other governments for
bilateral economic aid deliveries,** more than
three times principal. payments. LDC outstanding
debt had reached more than $20 billion at the end
of 1964, and then during 1965-68 it nearly doubled..
Debt rose somewhat more slowly over the next four
years (1969^72) , but at the end of 1972 it was two
and one^half times the level at the end of 1964
(see Table 3 and Figure 1) .
13. LDC debt to the West grew at a somewhat
higher rate than debt to Communist nations, but
the relationship between deliveries and outstanding
debt has been more favorable for Western than Com^
munist aid. Thus, in spite of the failure of Com~
munist aid deliveries to grow as part of the total
and in spite of the faster pay-off on LDC aid debt
to Communist nations, the LDCs still owed Communist
countries an estimated $4.4 billion at the end of
1972.
* Grace periods for Communist aid cannot be com~
pared with those for Western assistance because of
definitional problems, except for the PRC which
usually allows a 5-20 year lag between commitments
and the onset of payments. Moscow normally requires
initial principal payments one year after project
completion, which may mean a delay in principal
payments by 2-15 or more years after actual commit-
ments are made.
** Private and privately guaranteed debt would
probably add as much as $40 billion to $50 billion
to this total. An additional $10 billion to $15
billion also may be outstanding for military aid
deliveries.
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nc u g o y s arse a ese are compute rom estimate a verses an repayments
data. They are consistent with 1973 revisions of global outstanding debt estimated by DAC at
$80 billion for the end of 19'11.
2. In 1971 and 1972 an estimated $1 billion should be added for the account of other Western
non-DAC countries.
FIGURE 1
ESTIMATED OUTSTANDING OFFICIAL BILATERAL DEBT
OF LESS DEVELOPED COUNTRIES
TO WESTERN COUNTRIES TO COMMUNIST COUNTRIES
BILLION CURRENT`US$ BILLI[IM CIIRRFNr IISS
iu !z 1884 BB
PAELIMINAAY
NOTE CHANGE IN SCALE
7G 7y
SECRET
NO fORf/GN OISSfM
8
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 Approved For Release 200ti1v5~1'~~~CIA-RDP79T01098A000100160001-8
Net' Aicl ~r~ris hex : The ~x~,'k'a;ca~, k'~actor
14. The -size of a nation^s debt is not
necessarily a measure of strains on its economy,
nar is the size of its debt service ratio.* Prob-
lems usually occur when the debtor cannot settle
trade and aid accounts because debt servicing is
encroaching on its import capacity, Thus, because
of variations in domestic economic conditions, LDCs
have sought debt relief at very different stages
of indebtedness and at different debt service
ratios. Generally, their problems reflect a com-
bination of external and domestic factors that
surface when debtors foreign exchange availabil-
ities are not adequate to honor external obliga-
tions or if, by honoring them, domestic development
objectives are jeopardized.
15. In accepting long-term repayment responsi-
bilities, aid recipients weigh future liabilities
against the contributions of additional foreign
capital inputs to their domestic growth. Critical.
to the cost-benefit judgment, particularly as a
short--run consideration, is net resource availabil-
ity (i.e. gross aid deliveries, net of principal
and interest). Because the actual net transfer of
resources is a function of the size and terms of
gross capital flows, it is an important criterion
for judging relative benefits among aid programs.
16. The failure of capital flows to expand
sufficiently to compensate for the more rapidly
growing debt service has led to an overall dete-
rioration in the expansion of net aid transferred
over time. Even though gross capital flows to the
Third World from official bilateral sources have
been increasing in the past few years, the rate of
increase, net of debt service, has decelerated,
and net availabilities from some donors have
dropped. Even the 15~ increase in net official
bilateral capital transfers during 1971 was con-
siderably less than an effective addition to LDC
capital availability because of inflation. Never-
theless, net aid transfers from the West have con-
tinued to grow. Since the beginning of 1965,
those from Communist nations have fallen (see
Figure 2). The divergence in the net transfer
* The ratio between total debt service and total
export earnings.
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NET TRANSFER OF OFFICIAL BILATERAL CAPITAL fIGURE2
TO LESS DEVELOPED COUNTRIES
-FROM WESTERN COUNTRIES FROM COMMUNIST COUNTRIES
MILLION CURRENT US$ ~,,,,,,,,, ,,,,,,,,,,,~ ,,,,.,
UELIVESIES
FflUM THE
` UBSA ANO
1884 88 88 78
More Chad S1 billion of grant-like //ows have not
been included
72
PSELIMINASY
1884 68 88 70
"Ahaut $15 million of principeipayments come aut
of this /law.
SECRET
NO fOREICN DISSEM
patterns between Communist and Western aid pro-
grams probably is the most important difference
to have emerged between the two programs. It is
the result of the much larger growth in gross
flows from Western nations as well as qualitative
differences in Western and Eastern programs.
One of the most important factors responsible for
the difference is the high grant element of
Western aid (82~ for commitments made in 1971).*
Under the most liberal interpretation of current
Communist aid terms, the grant element would be no
more than 35%-400.,
17. Net aid receipts from the West have grown
in almost every year since 1954. They rose rapidly
during the first decade of the aid program (1954-63)
because of sharply expanding aid deliveries and
large amounts of grant aid. Then, between 1964 and
1969 deliveries leveled off. More concessionary
terms of aid and debt relief continued to provide some
* The grant element measures the concessionary element
of aid terms. It is derived by relating the present
value of interest, principal payments, and the length
of the grace period.
10
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growth in receipts. Laxg'ex gxoss Mows. in 197072
again contributed to a conta,nuing increase in
Western net aid transfers. Meanwhile, the net
flow of Communist aid had fallen, from a record
$465 million in '1964 to $280 million in 1972. The
decline was noted in every year until 1971, when
unusually large Chinese aid deliveries, made before
large repayments on Chinese-aid fell due, drove the
net up somewhat. If Chinese aid deliveries are ex^
eluded from the Communist total, the narrowing gap
between deliveries and repayments is even more pro-
nounced: a net of only $60 million moved under
these accounts in 1972, down from $395 million in
1964. Unless there is a marked change in Communist
aid policy, the net flow will fall to zero and then
become negative in the next several years.
Im act of Debt Service on the LDCs
18. Debt service on all LDC accounts* was
equivalent to about 15~ of total merchandise exports
from these nations in 1971, slightly higher than in
1966. The ratio is higher for some countries and"
groups of countries. For example, it was 25~ for
South Asia because debt payments more than doubled
while merchandise exports increased by only 20~
between 1965 and 1971. In the aggregate, the ratio
. of debt service to total merchandise exports** for
Communist and Western official bilateral aid was
roughly the same, but the ratio was far higher for
the USSR than for the United States. Soviet debt
service as a percent of LDC merchandise exports
has run about twice as large as for the United
States. During 1969-71, about 300 of total mer-
chandise exports from Soviet aid clients was de-
voted to repayment of their aid debt to the USSR.
During the same period, LDC repayments to the
United States ranged between 10~ and 15~ of the
total exports of LDCs that had received credits
from the United States. In 1966 the ratio for the
United States was 10~, compared with 25~ for the
USSR (see Figure 3) .
* Based on data for 80 LDCs and including private
and privately guaranteed debt servicing as well as
multilateral global debt service,
** Merchandise exports are used for comparing
Western and Communist ratios because export earn-
ings data are not readily available for the latter
nations .
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FIGURE 3
LESS DEVELOPED COUNTRIES' DEBT SERVICE COMPARED
WITH MERCHANDISE EXPORTS*
TO THE UNITED STATES TO THE USSR
MILLION CURRENT US$ MILLION CURRENT US$
10.000 r_.._- _.
__
I 2000 ~ -
1986 67 88 89 70 71
'Limited to the countries that ere in debt to the !/oiled States and USSR.
518502 8-73 C10.
MERCHANDISE
A EXPORTS
MILITARY
DEBT SERVICE
ECONOMIC
DEBT SERVICE
T 71
SECRET
NO fGHfIGN 0/SSfM
19. These ratios for Communist and Western
countries may not be exactly comparable for mea-
suring LDC ability to repay debts. Communist
aid may be easier to repay than Western aid because
of the "means of repayment." Most Western aid is
tied to purchases in the donor country, but repay-
ment of principal and interest i.s in free foreign
exchange . Communist aid also is "tied, " but re-
payment is in local goods. Commodities used as
repayment for LDC debts to Communist creditors
would be equivalent to hard currency payments if
they could be sold for hard currency, but frequently
these goods cannot be disposed of, because of their
inferior quality, a lack of demand, or other barriers
in developed country markets. Communist willing-
ness to accept cheap consumer goods from Egypt
and India, foods from African nations, and crude
products and raw materials not salable on world
markets allows LDCs to pay their debt without
creating pressures on limited foreign exchange re-
serves and hard currency earnings. It enables them
12
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to exchange otherwise surplus goods for development
capital. Meanwhile, the demand for these goods
generates domestic employment. Of particular
advantage to the LDCs is the .willingness of Com~
munist nations to accept as repayment the output
of plants built with Soviet aid, for which at least
initially there may be no ready market. The weight
of this repayment consiberc~i~~calftarthemdecision
recipients, but it may ears to be more
to accept Communist aid on what app
burdensome terms than for Western aid: Iran's
natural gas, previously flared as a waste product,
is now paying for a $10.0 million annual flow of
Soviet capital to Tran. Other Soviet-aided pro-
jects -- natural gas from Afghanistan,~bwilltpaY
from Guinea, and alumina from Turkey -
for Soviet aid. Steel rails from India and Soviet
use of port facilities in Berbera, Somalia, also
fall into this category.
Debt Relief
20. Debtor nations rarely have defaulted by
outright refusal to honor their debts, and they
have sought relief only as a last resorbot Whavern
and Communist creditors, although they
been willing to renegotiate LDCha earefusedctodpros
where a real need has existed,
vide automatic relief. In a Pravda article of
29 March 1973, Skachkov, Chairman of the State
Committee of the USSR Council of Minissovietor
Foreign Economic Relations, stated:
economic assistance is not charity. It is given
on a mutually advantageous basis and rests on the
principles of equality and respect for mutual
interest."
21. Debts totaling about $3 billion (including
private commercial debt) nhLDCsband theiroWestern
between more than a doze
creditors. Commuiest withtdeferredepaymentseofef
to as many countr LDCs bear heavy
about $200 million. Although many
debt service burdens, most of them have been able
to maintain a reasonable balance betA.cuteddebt
servicing liabilities and exports. a few LDCs,
servicing problems have affected only roblems
although some countries have had temporary p
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because of the bunching of payments or severe fluc-
tuations in export earnings. The latter countries
have sought temporary relief; others, with sustained
shortages of foreign exchange and severe imbalances
in their debt structure, have sought broader cor-
rective measures., Seven countries* were responsible
for more than 80$ of the LDC total outs anding
debt to the USSR at the end of 1972. Except for
Afghanistan, Indonesia, and Syria, these countries
have met their obligations. India, Iran, and
Indonesia also account for a large portion of LDC
debt to the West. With Pakistan, Brazil, Mexico,
South Korea, and Turkey added to the list, these
nations account for one-half of the LDC total deb
to the West.
22. Debt relies= may take any of the following
forms: (1) cancellation of the debt, (2) reschedul-
ing of payments, oz~ (3) refinancing the debt. West-
ern nations ~.re not known to have canceled princi-
pal payments although occasionally they have forgiven
interest payments due. On a very few occasions,
Communist countries have converted loans to grants.**
Occasionally they have canceled interest payments.
Debt rescheduling -- a rearrangement of maturities
to eliminate a bulge in debt servicing -- is the
most widely used form of relief provided by both
Western and Communist creditors. The third form
of relief --- refinancing (most commonly used by
Western nations) -- implies a debt rollover in
which new credits are extended to equal principal
payments due on the outstanding debt. This relief
implies that financed investments yield enough to
Pay the interest due. Sometimes debt rollover is
combined with a rescheduling of maturities. Re-
financing is not knawn to have been used directly
as a relief device by Communist nations, although
in some cases the resulting flow pattern after a
rescheduling may effect a rollover.
23. Most major debt renegotiations with the
West are conducted through multilateral channels,
* Afghanistan, Algeria, India, Iran, Indonesia,
Iraq, and Syria.
** China's conversion to grants of $900 million
of credits extended in 19.64 and 99.68 to Pakistan
Bangladesh is the most recent example.
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which create a procedural framework within which
individual creditor nations effect bilateral settle-
ments. These multilateral arrangements started in
1955 and 1956 to deaBr zil andgArgentinalwithrtheir
ages accumulated by
West European trading partners. Broad rescWesterng
negotiations currently are under way among
consortia with Chile, Ghana, India, and Pakistan.
Communist countries usually have provided debt
relief bilaterally, but often the East European
nations follow Moscow's format. The renegotiation
of Indonesia's debt to Communist nations was sig-
nificant because most of the Communist creditors
followed the Western accord.
Outlook
24. The pressure of debt servicing on LDC re-
sources will become more burdensome in twhichthave
half of the 1970s. Long grace periods,
the de-~
begun to expire,'on loanTan~aaiddsometimes offset
cline in the amount of g~
by a higher volume of lending; and less conces-
sional terms by some major lenders all will con-
tribute to a continuing rapid rise in debt service.
Even if debt service were to grow only as fast in
the next five years as it did inroximatelyf$6ebily
1977 LDCs would have to make app
lion in interest and principal payments. To sustain
the amount of net aid transferred in 1972, and
assuming the same concessional terms, the gross
.capital flow would Caim ortbrequirementsbgrowoand~0~.
Nevertheless , as L P
debt service rises, further accommodation to theird
to seek relief, and es may have to be made. West
hard currency shortag
ern nations have recognized the relationship between
debt relief and the conditions of aid. Communist
nations have not, although they are more circum-
spect in their aid undertakings than before. Com-
munist nations wilandosollongtasslocal goodsmareal-
ity of interest, ment for Communist
in surplus but acceptable as repay
aid, the burden on LDCs of making these repayments
will be less~~than for WwillrcontinueTtosconditionns
of repayment probably _
the acceptabiheavier deb thserviceuresponsibilities
spite of the
and a probable negative flow of aid. Western
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nations will have to continue to accommodate to
the problems related to limited LDC foreign
exchange availabilities and the erosion of aid
availabilities for development. But if Communist
nations are unable to absorb LDC export surpluses
(or if LDC goods can be disposed of for hard cur-
rency), Moscow and Eastern Europe may be forced to
conform more closely to optimum aid criteria being
pressed on the developed nations in international
councils.
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Gross Official Bilateral Capital Flows from Developed
to Less Developed Countriesl
1. Total gross official capital flows include grants (less reparation and indemnification payments); gross loans with maturities of five years or more; for
1965-71, gross loans with maturities of one to five years (these, however, amount to less than 4% of the total for that period); and net grant-like flows from Western
nations (loans repayable in recipients' currencies and transfers of resources through sales for recipients' cunencies). These capital inflows include what has been re-
cently defined as Official Development Assistance (ODA) and other official aid, exclusive of private export credits that aze publicly or officially guaranteed.
2. Prelimina[y
3. Including only members of the Development Assistance Committee of the Organization for Economic Cooperation and Development (OECD). Capital from other
sources probablyiwould not add mote than 5% to the total.
4. For 1960-65, net export credits are included. For other years, gross credits aze used.
5. Including Australia, Austria, Belgium, Canada, Denmark, Italy, Norway, the Netherlands, Portugal, Sweden., and Switzerland. Australia became a ntentber of the
DAC in 1966, and its bilateral flows are counted only since 1965. Disbursements by all donors to Yugoslavia are excluded.
Debt Service for Official Bilateral Capital Flows
from Developed to Less Developed Countries
Total
1957-72
1957.59
1960-64
1965
1966
1967
1968
1969
1970
1971
1972t
Total
21,369
1,549
3,747
1,241
1,380
1,470
1,683
2,020
2,461
2,849
2,969
058
2
Principal
14,308
1,348
2,277
766
860
921
1,043
1,330
1,707
],998
,
911
hllerest
7,061
201
1,470
475
520
849
640
690
784
851
630
2
Western
19,353
1,525
3,506
1,133
1,245
1,316
1,482
1,797
2,177
2,542
,
800
Principal
12,817
1,330
2,112
691
763
809
896
1,167
1,487
1,762
1,
830
Interest
6,536
195
1,394
442
482
507
S8(i
630
690
780
339
Communist
2,016
24
241
108
135
184
201
223
284
307
258
Principal
1,491
18
165
75
97
112
147
163
220
236
81
Interest
525
6
76
33
38
42
54
60
64
71
Approved For Release 2000/~~,I~:CFA-RDP79T01098A000100160001-8
 Approved For Release 2000/05/15 : ~~79T01098A000100160001-8
Official Bilateral Grant Aid Deliveries
to Less Developed Countries
Million Current US $
195471
1954-59
1960-68
1969-71
Total
45,121.5
10,705.9
24,056.7
10
358
9
Western
44,605.6
10,666.7
23,651.9
,
.
10
287
0
Australia
1,568.0
185.0
853.7
,
.
529
3
Austria
24.9
15 8
.
9 1
Belgium
970.8
10.0
696.8
264
0
Canada
1,329.8
206.4
694.2
.
429
2
Denmark
79.1
....
28.7
.
50
4
France
9,702.3
1,610.9
5,794.3
.
2
297
1
Italy
355.6
38.6
184.0
,
.
133
0
Japan
825.6
178.5
277.4
.
369
7
Netherlands
741.1
116.8
255.0
.
369
3
Norway
103.6
28,9
32.6
.
42
1
Portugal
96.4
1.6
57 6
.
37 2
Sweden
273.3
52.8
95.4
125
1
Switzerland
82.9
0.3
33.4
.
49
2
United Kingdom
3,267.9
600.1
2,002.6
.
665
2
United States
23,704.4
7,625.0
11,901.4
.
4
178
0
West Germany
1,479.9
11.8
729.0
,
.
739
1
Communist
515.9
39.2
404.8
.
71
9
USSR
248.5
12.5
211.9
.
5
6
Eastern Europe
10.1
0.6
8.4
.
1
1
China
298.7
26.1
184.5
.
65.2
Approved For Release 2000/05/15 ~~~~C~.P79T01098A000100160001-8
 Approved For Release 2000/05/15 :CIA-RDP79T01098A000100160001-8
Secret
No Foreign Dissem
Secret
Approved For Release 2000/05/15 :CIA-RDP79T01098A000100160001-8
 tinalys>;s:
;9oneT.'~.t the req. of DDO (5-5407) D/TA (Project 35. 5
pprove or a ease 2000/05/15 :CIA-RDP79T0~ 0~8A000100160001-8
CONTROL RECORD FOR SUPPLEMENTAL DISTRIBU 10
LDC Debt Service Burden: A Cam arison of Western and Communist Pro rams
ERIES NUMBER CLASSIFICATION OF REPORT DISTRIBUTION TO RC 25X1A
_ _ _ _ _ _ UNCLASSIFIED NONE
s
DATE OF DOCUMENT
September
1973
NUMRER OF COPIES NUMBER IN RC
~
DATE
COPY
N0. (S)
25X1C
RECIPIENT
SENT
RETURNED
1 cy
2 Oct 73
1 c
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COPY
NO. IS)
~,~~ Aaaroved For Release 2000/05/15 :CIA-RDP79T01098A000100160001-8
 25X1A
SECRET
/ Co
runu~.r~l VR V C T
GENERAL INSTRUCTIONS
Rating forms will he completed for each finished intelligence publicafiop prepared .by the DDJI and DDS&T. This is a
machine-supported system and information rnust bcr gathered in a formatted fashion. Therefore, each analyst will complete
the NON-SHADED parts of section I and II of this form. Please type or print legibly. Questions should be directed to
IRS/HRG, Room 2G 40, x1b31 (red) or x4273 (black).
SECTION I -PUBLICATION TITLE AND CONTENT
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TOPICAL CATEGORY ~. GEOGRAPHIC AREA CATEGORY
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ClyrT~ ~ S7f37ES .
.
_r~-3_ ~_~' ~ ~1_ ___
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LIST SPECIFIC COUNTRIES: ~ ~ L'?'LL-'-r11-13_~'s' C'-~~tS.~7=~C~~-!_.$
T
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BE
TO
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REC TYPE
_
_
TOPIC
AREA
(7.8)
I11-L2)
(13-16)
~~_
FORM 3492 SECRET
-,3
 25X1 B
For each collection program contrihuting Intarmanon ro me N~~~~~?u~~ti~~, --?~ -~ --~~, - ~ -
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provide any reporting useful in the publication, check the box labeled Not Applicable.
lien adidigtionalr foirmsl must be ontplet d;oe.g 9lreid9a-economc s~ Stateoand Japargr-econom~s--CS~ mix for each varied
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"-- intelligence item could not have been reached without it.
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? il5e finished intelligence item.
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Translation of Foreign Lang. documents
12. by FBIS, JPRS, etc.
13. Non-USI6 Agency Rprs, (USIA, AID, other
_such reports)
14. Open literature (professional tournals,
US wire ser., items, etc.)
*For Items_No. 12, 1 3, 14, and 15 specify source of reporting used.
NON-USlli AGETlCY1S1:
L (~ I
OPEN LITERATURE: ~a ~yt~rs~ ~ ~~~~ c, ~ o-~- ~ L'C L` ~ ~'' ~ ?"`~'
I -~--
OTHER:
pQCUMENT TYPE (bl -62
03 GM OS M 07 IR 09 RA
___~- 06 GR _ / OD fj 10 Weekly Review-Spec Rpt
04 I M ) `~
CLASSIFICATION: SC C~~ f / Nd ~~ ~~ IC ~ .J~ S S ~ ~~
List C5 information Reports that were key or supplemental information sources:
 RECORD OF REVIEW OF OER PUBLICATIONS FOR SECURITY/SANITIZA A A
SUBJEC`~rT^ / w~/_wSj
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SECURITY REVIEW'
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DATE
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UNEDITE^ DRAFT
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~~ I ?
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43)
3
6-
FORM ~f358 oesol.ErE PREVIOUS E EI GROUPI -
4- 70 L E D I r I 0 N S Excluded from automatic
downgroding and dedmsifwtion
? ~ SECRET
~ e I
 Approved For Release 2000/05/15 :CIA-RDP79T01098A000100160001-8
Commerce
Export-
Im~ort
Bank of
Department of Commerce
~ ~fL (31Zl~rJT
Mr. Murray P. Rennert
Assistant Director
Program Development
~a~ea~x- of Intern~rtional Commerce I~ f L~ 1~
b ~ .serr sost~ri.~k ~
tsc~t Vice Presiden ~~ ~
Export-Import Bank of the
United States
United States
Treasury 6
~~ , e ~P
U.S,
T-ar ff
Commission
a ~~iyt ~~~: ~
L ~
~11~Mr. ~-Wiliam H. Bray? `~'~?~ y~ ~'
Office of National Security Affairs
D~~epartmentof the Treasury
4~. George Ecklund
Director, Office of Economic Research
U.S. Tariff Commission
`~ ~ {~' mac-^~-fi '..'..~ 6~ - _
w7 ~~..
! ~~~
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Approved For Rele
.~a~
 Approved For Release 2000/05/15: CIA-RDP79T01098A000100160001-8
Army ~p Mr. Michael C. Kenney, Jr.
Plans and Programs Office
Directorate of Intelligence, OACSI
Department of the Army
Pentagon
Navy P'`'~,. ~mdr. William A. Lynch, USN
NAVINTCOM-OOXA
Plans, Policy and Special Operations
Group
Hoffman Building
Department of the Navy
Air Force John Dale Paf~g
Es ates Bra~Yf?~
Threat ,~`apabilities Division
Direct ~~e f,~Intelligence Applications
AF / KB
National
Secur-i-ty'
A enc
STATINTL
artment of the Air r~orce
National Security Agency
STATINTL
National Security Agency
Agency for ~`~ Mr. Elmer E. Glaser
T"nternational Chief, Economic Data Division
Development Office of Statistics and Reports
Agency for International Development
Agriculture ~ Mr. Joseph W. Willett
Demand and Competition
Director,
Division, Economic Research Service
Department of Agriculture
Mr. C~ence E. Pi]~~
Chief, Fad ,ast~~ranch
Foreign R~,eg 0 ~~1__ Analysis Division
Econo ~ Researc7~vice
De~ent of Agricu `t'ire
-2-
Approved For Release 2000/05/15: CIA-RDP79T01098A000100160001-8
 ER RP 73 16 D pebt ervice Burden: A Comparison of
Western ~~~'~~t~~~QQ~ ~ CIA-RDP79T01
Suggested Distribution
~~ ~ ''~ P er
01-8
for Debt Service ap -~.,,
~.
F~ .1
1
~! ~~
Mr. Sidney Weintraub t
Deputy Assistant Secretary
~;/~'-~~~
~
~
International Finance-and
-
~
~
Development
Bureau of Economic and -----,._.._.,____~
~
`
~~.~
Business Affairs
Department of State
~" -
~1~~
The Honorable Ray S. Cline
Director
Bureau of Intelligence and Research
Department of State
v
~,
Mr . John Ghiard~,.
Director
Office of Economic Research and
Analysis
Bureau of Intelligence and Research
Department of State
Mr. Arthur P. Allen
Deputy Director
Office of Economic Research and
Analysis
Bureau of Intelligence and Research
Department of State
Mr. William Struck
INR/REC
New State Bldg.
Department of State
Defense
Intelligence DIA DI 5 A 4
A enc A Bldg.
Arlington Hall Station
Defense Intelligence Agency
DIA DI D
A Bldg.
Arlington Hall Station
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STATINTL
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 r~nalysl;s
D/TA (Project 35. 6559)
pprove or a ease 01098A000100160001-8
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SECRET/NFD
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45
DATE OF DOCUMENT
S tember 1 73
NUMBER OF COPIES
150
NUMBER IN RC
COPY
DATE
N0. (S)
RECIPIENT
SENT
RETURNED
1 -2
~ DPI
7 Se 73
4
ADD/OER
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5
via O/ ~/ OER
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SA/ER & D/SA/ER
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2?6$ 2353 ppro~(~r~~.~ Release 2000/05/15 :CIA-RDP79T01098A000100160001-8 ~>~
 Approved For Release 2000/05/15 ? CIA-RDP79T01098
narE
77
CRS/ADD 25X1A
10 Se 73
~~3
7s
7g-104
Filed in St/P/C
10 Sep 73
105
Archives file
_J~
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106-150
Records Center
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 Approved For Release 2000/05/15 :CIA-RDP79T01098A000100160001-8
STATINTL
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INITIALS
I
A DD/OER
ld
~~
2
D/OER
~'
3
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t~ 1 /
(~~~~
5
6
ACTION
T REPLY
PREPARE REPLY
APPROVAL
DISPATCH
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FILE
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INFORMATION
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ATTACHED S-PROJECT IS UNCLASSIFIED
VERSION OF RP 73-16, LDC DEBT SERVICE
BURDEN A COMPARISON OF WESTERN AND
COMMUNIST PROGRAMS, S/NFD, NOT RELEASAB
SA/ER SUGGES DISSEM OF THE UN LASSI
VERSION TO
APPROVE ---- `/
f ,/"~
l p
/
FOLD HERE TO RETURN
TO SENDER
FROM: NAME, ADDRESS AND PHONE NO.
DATE
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~ 8EP
UNCLASSIFIEB CONFIDENTIAL
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 RECORD OF REVIEW OF OER PUBLICATIONS FOR SEGURITY ANI A A
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FORM 2358 OBSOLETE PREVIOUS
4.70 EDITIONS
GROUP I
 STATINTL STATINTL
Approved For Release 2000/05/15 :CIA-RDP79T01098A000100160001-8