Foreign Relations of the United States, 1969–1976, Volume E–7, Documents on South Asia, 1969–1972
Document 344
344. Telegram 5041 From the
Embassy
in Afghanistan to the
Department of State
1
2
Kabul
,
August 16, 1971, 1002Z

Subject:
Afghan Request for Debt Moratorium
Refs:
(A) Kabul 4841 (NOTAL);
(B) Kabul 4851 (NOTAL);
(C) Kabul 4853 (NOTAL);
(D) Kabul 4971 (NOTAL)
1.
Begin summary: I saw
RGA
Finance Minister Dawar at his request morning August 14. He said
USG
first government he approaching with request for favorable consideration of debt moratorium at least until March 21, 1972, and possibly until March 21, 1973. I responded that Embassy would recommend sympatetic consideration of Afghan request but that this matter for multilateral action and formal

response would have to be in those terms. End summary
2.
I saw
RGA
Finance Minister Dawar morning of August 14. Mohseni, Director, Economic Relations, MFA, and Chief, Embassy Economic Section also present. Dawar outlined briefly financial situation indicating that government income increasing problem in relation to expenses, especially since revenues declining at time when expenditures increasing to meet drought emergency.
He noted specifically that government had been forced to take intensive and rapid steps for acquisition of feed for animals and drilling of deep wells for drinking water. He said that under circumstances,
RGA
forced to think about means of cutting expenditures, including moratorium on foreign debts. He said that
RGA
confident that friendly countries have a sympathetic understanding and that details would have to follow such conversation as this one. He asked for expression from us of how we view problem.
3.
I said we do have real understanding of exceptional and unusual problem facing Afghanistan but that, of course, official answer regarding moratorium would have to come from Washington. I added that I was confident that deep understanding of U.S. Mission in Kabul would be reflected in our capital.
4.
In response to my question about form and timing of moratorium, Dawar said these had not yet been ironed out in detail. He said, in broad terms, that initially there would be request for moratorium until end current Afghan year, March 21 1972; but, if general conditions in Afghanistan did not improve by that time, it likely
RGA
would request consideration moratorium for another year. He added that
RGA
does not wish to use this step as means of financing normal and routine expenditures; but in view expected decline in revenues and exports (losses from export of karakul and wool for example), and their unfavorable impact on direct taxation could force a two-year period. He said that there were number of approaches to moratorium; such as reduction in amount of interest only, postponement of payment due dates, postponement of payments of both interest and principle, etc.
5.
I reiterated that mission sympathetic and hoped my government would be as well and then noted that U.S. debts were modest in relationship to others, especially
USSR
, and asked if there had been any reaction from
USSR
on such an approach. Dawar stated meeting with me was first approach and commented it true U.S. debts modest relative to
USSR
which in first place. He noted that immediately following my visit he was speaking with West Germany Charge. He added that Soviet Ambassador in Moscow and that he would be seeking meeting with Soviet Charge. He also noted that he would be heading delegation to
IBRD
annual meetings in Washington in September.
6.
I urged that
RGA
consult not only with governments but especially with IMF. I pointed out that in such a moratorium exercise as this,
IMF
and World Bank play key coordination role. In order insure Dawar understood that this is intricate undertaking, I suggested, informally, that consideration would have to be given to various kinds of debts: for example, in case of
USG
there are ExIm,
USAID
and its predecessors,
PL
480, and possibly private credits. He said he understood but that these were technical points that would have to be spoken to later; however, I wanted to be as sure as possible that
RGA
understood that this no rpt no easy problem.
7.
FRG
Charge Kilian and Economic Counselor Von Jena called on me and Cohn, respectively, following their meeting with Dawar. They reported scenario much as above. However, Dawar told them he would not rpt not be seeing Soviet Charge and would await return Soviet Ambassador and also
RGA
would wait until
IBRD
meetings in September to approach
IMF
. On August 15 Cohn informally spoke with Mohseni and suggested
RGA
instruct
Malikyar
call on
IMF
in Washington and also informally discuss situation with Kayeumi of
IMF
who presently in Kabul on vacation.
IMF
Res Rep Selby departed Kabul for Washington assignment August 12; his replacement not rpt not due until September.
8.
Comment: Moratorium request has been expected as indicated in references. Mohseni indicated that
MFA
would be presenting us with formal note on this. Would appreciate Department advising
IMF
of this approach and that Department and
IMF
will work closely on matter. Would also appreciate early guidance.
Neumann