COMMITMENTS AND DISBURSEMENTS As indicated in table 6,5 15 loan commitments during the first half of 1964 totaled the equivalent of $307 million. Over 70 percent of total loans were authorized for the expansion of electric power facilities ($131 million) in Colombia, Ethiopia, New Zealand, and Nigeria, and for the development of transportation facilities ($108 million) in Ecuador, Iran, Liberia, Japan, Peru, Pakistan, and Tunisia. Also included were two loans totaling $32.5 million to assist in financing private industry in Pakistan and Thailand, and two loans totaling $35.5 million to assist in financing a natural gas liquefaction plant in Algeria and to extend the distribution of natural gas in Pakistan. 5 Through June 30, 1964, the Bank approved 386 loans to 73 countries and territories in the net equivalent of $7.8 billion in U.S. dollars and other currencies. (See table 7.) Approximately 60 percent ($4.6 billion) was approved for a variety of basic development projects in 37 member countries in 2 geographic areas: Asia and the Middle East and the Western Hemisphere. Over two-thirds ($5.3 billion) has provided financing for the expansion of electric power and transportation facilities. As the result of repayments to the Bank, portfolio sales, and exchange adjustments, the net total of effective loans held by the Bank on June 30, 1964, was $4,949 million. As shown in table 7, disbursements on Bank loans through June 30, 1964, totaled the equivalent of $6 billion, or over 75 percent of total net commitments. Although earlier disbursements were predominantly in U.S. dollars, increasing use has been made of other currencies in Bank disbursements. Through the end of the period under review, disbursements in nondollar currencies constituted a third of total disbursements. Loans are repayable in the currency disbursed by the Bank or, if the Bank does not hold the required currency, in the currency used by the Bank to purchase the particular currency or currencies needed. The U.S. Executive Director of the International Bank, or his Alternate, acting on the advice of the Council, supported the decisions taken with respect to the foregoing matters. DEVELOPMENT ASSISTANCE TO INDIA On May 26, 1964, the Consortium of governments and institutions interested in development assistance to India held its tenth meeting in Washington to discuss aid for India during 1964-65, the fourth year of India's Third Five-Year Plan. Under the Chairmanship of the International Bank, the meeting was attended by representatives of the Governments of Austria, Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, the United Kingdom, and the United States, by representatives of the International Bank and the International Development Association and an observer from the International Monetary Fund, "Not printed here. Total external assistance required for the Third Plan from all sources, including non-Consortium countries and private foreign investment, was estimated by the Government of India at $5.5 billion. A total of $3.4 billion of aid to India for the first 3 years of the Third Plan has already been pledged. At the meeting, additional aid of approximately $1,028 million was approved, subject as appropriate to legislative action or other necessary authorization. The pledges for 1964-65 are as follows: As it is considered important that a substantial part of the aid to be extended to India during the coming year should be in the form of non-project aid to be used for financing imports required for the maintenance of the Indian economy, about one-half of the aid pledged at the current meeting will be in this form. The total of aid pledges made by members of the Consortium during the first 4 years of India's Third Five-Year Plan amounted to the equivalent of $4.4 billion. TECHNICAL ASSISTANCE ACTIVITIES The Bank has increasingly been called upon for technical assistance and advice on matters relating to loan operations as well as on the broader aspects of development planning. A variety of techniques has been worked out to stimulate development and to avoid the unproductive allocation of scarce investment resources. The Bank assists not only in the formulation of national development programs but has also helped in carrying out studies intended to stimulate the development of particular economic sectors or to accelerate the planning of specific projects. Members of the Development Advisory Service continued to serve as Resident Representatives in the developing countries to provide advice on economic and financial matters, and, through the medium of the general survey mission, the Bank has examined the development potential of particular countries and recommended appropriate economic policies. It has also continued to act as Executing Agency for projects and sector studies financed by the United Nations Special Fund. In March 1964, the Economic Development Institute (EDI), established in 1955, began its first course to be concerned primarily with the evaluation of industrial projects, with 25 participants from 19 countries; and in April it began its third annual course in development planning conducted in the French language. To date, 317 officials from 84 less-developed member countries have participated in EDI courses. In the current period, the EDI also started distribution of the first items of a Spanish language library on economic development. The United Nations Conference on Trade and Development which met in Geneva from March to June 1964 called upon the Bank to undertake studies of proposals to increase funds for development lending and compensatory financing, on the use and terms of suppliers' credits, and financing of exports from the developing countries and on multilateral investment insurance. The Bank is proceeding with its continuing studies of the relationship between economic growth and external debt in order to provide a clearer picture of the financial costs of economic development. SECURITY ISSUES AND SALES OF LOANS In addition to its lending activities, one of the most important objectives of the Bank is the mobilization of private investment for economic development through the sale of bonds to private investors in the capital markets of the United States and Austria, Belgium, Canada, Germany, Italy, the Netherlands, the United Kingdom, and Switzerland in the currencies of these countries. As of June 30, 1964, the Bank's borrowings-its funded debt-amounted to the equivalent of $2,491.8 million. Of the total, $1.9 billion, or over 75 percent, was denominated in U.S. dollars with the balance in seven other currencies. During the current period, there was no new borrowing and the total debt declined by $18.6 million. An increase in the funded debt of $4.5 million of 412-percent, 20-year bonds, which had been sold under delayed delivery arrangements, was offset by a total decrease of $23.1 million as the result of maturities and purchases to meet sinking fund requirements. In addition to direct sales of its own securities, the Bank has developed an important investment market through the medium of participations in new loans as well as through sales of loan obligations from its portfolio. In the current period, sales of portions of loans amounting to $51.2 million represented a substantial decline from the $122 million of such sales in the preceding 6-month period. Through June 30, 1964, the aggregate amount of such sales was approximately $1.8 billion, about 67 percent of which ($1.2 billion) were sold to investors outside the United States, and over three-fourths of which were sales from the Bank's portfolio. The Council gave its approval to sales by the Bank of portions of its loans denominated in U.S. dollars. FISCAL RESULTS In the fiscal year ended June 30, 1964, the Bank reported a net income of $97.5 million and loan commissions of $33.2 million, as "Ante, doc. II-32. compared to net earnings of $82.7 million and loan commissions of $31.3 million in the preceding fiscal year. Previously, the Bank's net income was automatically allocated to the Supplemental Reserve against losses on loans and guaranties. However, in accordance with a resolution adopted by the Executive Directors in September 1963,7 and approved by the Board of Governors, the disposition of net income for fiscal 1964 was to be determined by the Executive Directors with the concurrence of the Board of Governors.8 A further change in policy was adopted with respect to the previously automatic transfer to the Special Reserve of the 1 percent per annum commission charge on the disbursed and outstanding portions of loans held by the Bank. As of July 1, 1964, this practice was discontinued. With minor exceptions, all income from loan charges will thereafter be considered as regular income and future allocations to the Special Reserve will be decided by the Executive Directors and approved by the Governors. As of the same date, the annual commitment charge of three-quarters percent on the undisbursed portion of existing and new Bank loans will be reduced to three-eighths percent. Principal repayments to the Bank in fiscal 1964 were $117.4 million, against $113 million in fiscal 1963, and repayments to purchasers of portions of loans amounted to $150 million, compared to $131 million in the preceding fiscal period. Total principal repayments through June 30, 1964, increased to $1,586.2 million, consisting of $772.7 million repaid to the Bank and $813.5 million paid to purchasers of borrowers' obligations sold by the Bank. Document II-47 Operations of the International Bank for Reconstruction and Development During the Period July 1-December 31, 1964: REPORT OF THE NATIONAL ADVISORY COUNCIL ON INTERNATIONAL MONETARY AND FINANCIAL PROBLEMS, SUBMITTED OCTOBER 18, 1965 (EXCERPT)" NINETEENTH ANNUAL MEETING The Nineteenth Annual Meeting of the Board of Governors of the International Bank for Reconstruction and Development was held in Tokyo jointly with the Annual Meetings of the International Monetary Fund, 10 the International Finance Corporation 11 and the International Development Association.12 In his address to the Governors, George D. Woods, President of the International Bank and of its affiliates, reported on events during the past year and pointed out that a 7 See American Foreign Policy: Current Documents, 1963, pp. 180-181. 'H. Doc. 306, 89th Cong., Oct. 19, 1965, pp. 8-14. Part III of the NAC report. number of the proposals made a year earlier with respect to changes in lending policies of the Bank and reorientation of some of the activities of the World Bank family of institutions had since been implemented. The Bank had extended loans with a final maturity as much as 35 years, and a grace period as long as 8 years. The commitment charge on the undisbursed portion of Bank loans had been cut in half-from three-fourths to three-eighths of 1 percent-effective July 1, 1964, and the Executive Directors agreed on a restatement of policy under which the Bank would finance some of the local costs of high priority projects in cases where financing for imports alone would not provide adequate support. Under agreements negotiated with the Food and Agriculture Organization of the U.N. and with the U.N. Educational, Scientific, and Cultural Organization, the Bank together with these organizations was helping governments to identify and prepare projects in the fields of agriculture and education which would be suitable for Bank or IDA financing. Mr. Woods was of the opinion that the Bank and its affiliates should increase their efforts to stimulate industrial development and that the IFC should be the principal vehicle for this effort. In this connection, Mr. Woods strongly supported the proposal before the Governors to permit the Bank to make loans to the IFC without government guarantee and to enable the IFC to borrow up to a total of four times its unimpaired subscribed capital and surplus. In terms of increasing the effectiveness of the Bank's activities in the period ahead, Mr. Woods noted that the Bank and its affiliates would be increasingly concerned with three basic issues: The achievement of a substantial increase in the flow of public and private funds to the developing countries; an increase in the proportion of such funds provided on less burdensome terms; and the application of these funds in a manner which will permit the continuation of development efforts regardless of fluctuations in export earnings. At the discussion of the Bank's Annual Report, Secretary Dillon referred to the studies conducted during the past year by the Bank at the request of the U.N. Conference on Trade and Development, which were designed to explore new and improved techniques in dealing with the development effort. A major concern of the Bank, he noted, was the growing debt burden of the developing countries and the need for restraint by both creditor and debtor countries in financing sales on inappropriately short term. In noting that the Bank might soon reenter the capital markets on a substantial scale, he pointed out that efforts should be increased to assure the development of more effective facilities for mobilizing private savings in the capital markets of industrialized countries that are accumulating international reserves. The Secretary also supported the recommendation of the Executive Directors that the Bank transfer $50 million of its net income for the fiscal year ended June 30, 1964, to the International Development Association, as well as proposals to permit the Bank to lend to the IFC for relending by the Corporation without guarantee to private |