Coll 54/2 'Middle East (Official) Committee: Working Party' [‎226v] (452/642)

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CONFIDEI'fnAL
FOREIGN OFFICE TELE GPu-Jvl WO. i,2^ I'O B^GDiJ)
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their development programme and he v.lll require to he
convinced that they are unable to put up the £3 million
for the sterling portion’of the'.estimated external
expenditure. In general we ourselves dislike the idea oi the
Bank lending sterling to countries holdin-g substantial
sterling^balances but we-would be prepared to look at
the Iraqi position again in the event of the Bank experts
coming to the conclusion that a sterling loan would be
justified.
5. Point (2) raises a very important question but'it
appeared that Iliff did not have in mind any such formal
arrangements as Bayne contemplated with regard to the
provision of dollars for -servicing and capital repayment'
of any dollar loan. Iliff wished to consider this point
further before discussing it more fully with us.
6. as regards point (3) while he did not entirely
rule out the possibility of a limited loan for internal
expenditure, Iliff said that the Bank would do all they
could to induce the Iraqis to find their own resources all
the finance required for local expenditure. He hoped that
in the^event of the Bank agreeing to a loan to cover external
expenditure sufficient confidence would be engendered
locally to enable an internal loan to be raised. We of’course
fully support the Bank*s view that an external loan for internal
purposes is to be avoided if at all possible since it.
cannot fail to have inflationary effects and that everything
possible must be done to persuade the.Iraqis to find the
dinars (amounting only to £6.8 million worth over a period
of 3 years) required for the projects in question.
7. -as regards the draft Bill for the constitution of
the Central Development Board, we have just seen Sir H. Mack’s
letter to Mr, Wright of .npril 11th, a copy of which has been
forwarded to Washington together with a paper containing
Crawford's comments thereon. A copy of the latter has also been
despatched to Bagdad. We should be grateful if His Majesty's
Ambassador at Washington would arrange to let Iliff see both
documents confidentially as soon as he returns to ’Washington and
would take steps to ensure that the Bank make contact with
Ali Mumtaz. Meanwhile His Majesty's xjnbassador at Bagdad
continues to press for the revision of the draft'Bill along the
lines of his letter.
[Copy sent to Middle East Secretariat].
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