Page:Pentagon-Papers-Part V. B. 2. b.djvu/57



Viet Nam budgetary deficit, not including local French civilian and military items, approximately 1.5 billion piastres current fiscal year. Expenditures about 2.8 billions and revenues about 1.3 billions. This deficit being financed by Bank of Indo-China advances to Viet Nam Treasury secured by promise French Treasury make francs available to Bank. Do not yet know how it is planned finance deficit after Bank of Indo-China is no longer Bank of Issue.

Most of proposed U.S. aid would be through Government-type projects rather than directly to private consumers who could be expected pay piastres. Ability Viet Nam provide counterpart would depend on level its cash balance which we do not yet know; on whether Bank Indo-China or new Bank of Issue would lend to Viet Nam and on what terms; and on whether Viet Nam would be able divert present outlays to counterpart payments U.S. aid. Not to be expected Viet Nam would be able increase non-loan budgetary receipts or borrow by means of security issues. Possibility of borrowing from the New Bank of Issue cannot be determined until its powers established by forthcoming inter-state conference.

To certain extent counterpart requirement may reduce political effectiveness of aid because aid is no longer outright gift. However, this probably outweighed by usefulness of counterpart which can be very great in channeling local currency expenditures for constructive purposes. Because aid will probably come from several funds, possibly including ECA which generally requires counterpart, it seems desirable have rule requiring counterpart in principle but waiving wherever justified, e.g. where no local currency available or no economically productive results expected. In this connection

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