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Grants and Loans in U.S. Foreign Assistance
Published online by Cambridge University Press: 18 July 2011
Extract
Of Some 45.5 billion dollars in aid which the United States has provided to foreign countries in the postwar period from July 1, 1945, through June 30, 1953, roughly 75 per cent is recorded as grant assistance, the remainder as assistance in the form of credits. Examination of the statistics in these two categories suggests that there really is a third category, in which some of the aid listed in each of the two might properly be put. Thus, transactions listed as “grants” have realized some repayments; others have been renegotiated into cash or credits. On the other hand, there are “loans” which are obviously part grants; other loans remain loans only because of our grants to the same country.
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References
1 The transactions mentioned in this section include neither U.S. funds invested in the International Bank for Reconstruction and Development nor the operations of the Bank itself. This organization made loans in excess of $1.5 billion in this period.
2 Data on foreign assistance used in this article were taken from various issues of Foreign Aid by the United States Government, a publication of the Department of Commerce. An explanatory note in the September 1952 issue of this series refers to foreign aid, extended subject to future settlements, as “indeterminate aid.” The reference covers only part of the residual category which is discussed here.
3 An explicit exception is the provision of technical assistance. As a matter of policy, the United States provides technical assistance (plus such equipment as demonstration supplies, pilot plants, and the like, which are inextricably related to this assistance) on a grant basis and independent of the country's estimated capacity to repay. This exception is of interest but not of great importance here, since the present discussion concentrates on the “capital side” of foreign assistance, on the aid used for purchases of supplies and equipment which constitute the vast bulk of U.S. aid operations.
4 Indeed, the fact that foreign credits can be made through a lending institution, even a public one, which must pay for its own funds and meet its own payroll, establishes a valuable minimum definition for the type of transaction which can be termed a credit. (It is presumed that repayment on international account is desirable despite its impli-cations for the future balance of payments of the United States. Of course, if we intend always to maintain an export surplus, the case for credits against grants is certainly weakened. And there are undoubtedly many opponents to grant “give-aways” who would object strongly to an unfavorable trade balance for this country!)
5 This view has in the past been presented by various members of Congress who argue: we lose nothing by putting a necessary transaction on a loan basis. At the worst, the receiving country will not be able to repay us and we are back where we would be if we had originally provided assistance on a grant basis. The worst situation will not be the case all the time. We are thus sure to come out ahead.
6 This may also be true in the case of aid directed at military objectives. A world political situation requiring less frontline strength may release for other purposes the resources being devoted to maintenance of military potential at current and prospective levels.