Memorandum Directing Reduction of AID Expenditures Overseas in Connection With the Balance of Payments Program

Memorandum for William S. Gaud, Administrator, Agency for International Development

SUBJECT: Additional steps to reduce balance of payments costs

Your agency has made notable progress over the past few years in reducing expenditures made outside of the United States under the economic assistance program. Expenditures for goods and services purchased abroad declined from 27 percent of total AID expenditures in 1963 to 10 percent in 1967. At present, all development loans are used exclusively for procurement in the U.S. Eighty percent of grants for technical and supporting assistance and other expenses are used to pay for U.S. goods and services.

In the current situation, however, we cannot rest on this record. I recently outlined a broad program to correct the balance of payments deficit. As a part of the Government actions under this program, we must take even more stringent steps to minimize the balance of payments costs of our AID programs. I therefore request that you take steps to reduce your expenditures overseas in calendar 1968 by a minimum of $100 million below what they were in 1967.

To achieve this reduction you should take steps to:

--reduce offshore expenditures for commodities, cash payments, technicians and other services to the bare minimum;

--increase the use of U.S.-owned local currencies that are excess or near excess to our needs;

--increase the contributions of AID receiving countries in the financing of our technicians and related costs;

--carefully review the requirements for personnel stationed abroad financed with U.S. funds.

In addition, I would like you to review and improve the effectiveness of our arrangements with individual countries to assure that AID-financed goods are additional to U.S. commercial exports.

I know that the additional measures called for will be difficult, coming on top of the very substantial efforts of the last few years. I am confident, however, that with ingenuity and resolve we can put into effect the arrangements necessary to carry on the economic aid program, which is vital to our interests and to the well-being of so many people in developing countries, with even less balance of payments impact.

LYNDON B. JOHNSON