REPAYMENT TERMS FOR COMMUNIST AID TO LDC'S

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001900020067-3
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 6
• Document Creation Date: December 19, 2016
• Document Release Date: July 29, 2005
• Sequence Number: 67
• Publication Date: April 11, 1974
• Content Type: MF

 11.) It.
Approved For Release 2005/08dQ,:~,~~85T00875R001900020
OE~P
STAT
11 April 1974
t
MEA ORANDUM FOR: Mr. rlrmer E. Glaser
Agency for InterrtaLional
Development
SUBJECT : ReP-itY.MMt Terms f=
Coninmunist Aid to LDCs
Attached is the briefing paper you requested in
your letter to Mr. Maurice 2,rnst on 8 April .1974 on
repayrient terns for Corununist economic aid to less
developed countries.
Attachmen?
As stated
Distribution: (S-6082)
Orig & l'- Addressee
1--D/OER
(11 Apr 74)
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!R aymen t Terms for Communist- _Economic
ic1 t' Less Dev.~l_oj ed Countries
(154-;'3) J
1. During 1954-73, the Communist countries extended some
$16.5 billion'of economic aid to less developed-countries (LDCs).
Almost all of the aid was provided as credits with fixed terms of
repayment. 1/ Less than 5%, or about $750 million, was grant aid.
The People's Republic of China (PRC) provided v'- :?,ut $450 million
as grants, almost two-thirds to Cambodia, Nepal, and Pakistan. 2/
The USSR provided grants of $280 million, one half of which was
to Afghanistan, largely for road construction. East European
countries provided only negligible grant assistance.
2. The terms of repayment of Communist economic credits to
the LDCs have changed little during the 20 years of the program.
Chinese repayment terms always have been the most liberal, usually
interest-free and requiring repayment over 10 years after 5-10 year
grace periods. In some cases, China permitted longer repayment
periods. On its $400 million credit extended in 1970 for the
Tan-Zam Railroad, Peking allowed 30 years after a 10 year grace.
New Chinese aid extended in 1973, for the most part, allowed 10
years for repayment after a 10 year grace pel-iod.
I. Includes credits w:it amortization periods of five years
or more.
2. Includes credits extended to Pakistan during 1964-68 that
were converted to grants in 1972.
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3. Most Soviet credits continue to call for repaymennt- over.
12 years beginning one year after project- completion and carry
interest of 2.5%-3%. These terms usually are applied to project-
type aid administered by the Soviet State Committee on Foreign
Economic Relations. About 70% of the $8.7 billion of Soviet aid
extended since 1954 has carried these terms.
4. Moscow has allowed longer repayment periods on about
$1.3 billion of its aid. Nearly $400 million extended to
Afghanistan is repayable over 19-25 years with grace periods of
8-25 years. Algeria, Turkey, and Yemen (San'a) received more
than $685 million of credits calling for repayment over 15 years.
5. About 15% of total Soviet aid consists of supplier-type
credits provided by the Soviet Ministry of Foreign Trade. Th..??',:
credits, which Moscow calls "commercial credits", sometimes arc
allocated by recipient governments to private companies. They allow
5-10 years for repayment, carry interest of 3%-3.5%, and-require
downpayments of up to 25%. Except for Chile, almost all Soviet
aid to Latin America has consisted of such credits. The first
major Soviet credit of this type was a $100 million extension to
Argentina in 1958. 3/ During 1.964-67, the USSR extended some
$775 million of these credits, more than two-thirds to Egy:r.,
India, and Pakistan. Since 1968, Latin American countries have
received about $90 million of the 5-10 years credits, Iraq
approximately $140 million, and Egypt, about $95 million. This
3. O1nis C_0z7tz t'7as reduced to the amount drawn ($29 million) when
it expired in 1961.
-2-
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type of aid has not reduc..:.:c1 Soviet project aissistance, as is
sometimes assumed, but in fact has declined as a percent of total
new aid extended, from almost 30% during 1964--67 to about 15%
in 1968-73.. No supplier-type credits were extended during 1973,
although a 2 million ton grain sale to India in October (valued
at $350 million) allowed only 5 years for repayment (probably
in grain) after*a 2 year grace period. The credit was interest
6. East European aid almost always carries harder terms
than Soviet or Chinese aid. Dowanpayments often are required,
repayments usually are made over 5-8 years, and interest normally
is set at 3%-3.5%, although it has ranged up to 7%. These
aid terms have been softening in recent years, however, as a
number of 10 and 1.2 year credits have been extended, often with
2.5% interest. In 1971 about 450)- of Eastern Europe's aid to
Latin American countries carried 12 year repayment periods and
in 1972-73, more than one-half of the aid provided allowed 10-12
years for repayment. Czechoslovakia's $100 million credit to
India in 1973 allowed a 3 year grace after which repayments are
to be stretched over 12 years for equipment deliveries. For
component deliveries, the credit allowed a 1 year grace with 10
years for repayment. Interest for both categories of aid was set
at 2.5%. These are the most lenient terms Czechoslovakia is
known ever to have extended. Poland's $100 million credits to
Algeria and Iran-in 1973 are believed to have carried. 12 yc.:ars for
repayment and 2 1/2% interest, compared with Warsaw's usual
8-10 y;iars, 3%-3..5%` terms.
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7. Most Corimunis-t- credits allow r~- _ayment in the local
currency or goods of the aid recipient. The exceptions to this
rule generally app: ).y to countries, such' as Indonesia, that do not
have clearing agreements with Communist countries. Goods used
for repayment often are the output of Communist assisted plants.
Some of these arrangements are highly advantageous to donor
count.ries, such as Iran's and Afghanistan's repayments to the
USSR in natural gas, Iraq'.s repayments to Moscow and certain East
European countries in crude oil, Guinea's repayments in bauxite,
and the dozen or so countries that pay for Soviet fisheries
assistance by allowing the use of their. shore facilities and
extending port rights to the Soviet fishing fleet.
CIA/OER
11 Apr 74
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