State Dept. Criticized in Congress for $40, 000, 000 Loan to Nasser

Sharp criticism against the United States role in the grant of a $40, 000, 000 standby loan from the International Monetary Fund to Egypt this week was voiced here in both branches of Congress today.

In the House of Representatives, Congressman Seymour Halpern, New York Republican and ranking member of his party on the House Subcommittee on International Finance, called for an investigation as to whether IMF rules had been violated by reported State Department pressure for granting the loan to Egypt on unusually liberal terms. In an address on the House floor, he expressed doubt as to whether the legal provisions pertaining to IMF loans permitted the granting of the loan under the circumstances reported.

In the Senate, Sen. Kenneth B. Keating, New York Republican, charged in a speech on the upper chamber floor that the U.S. pressures on the IMF were a “virtual endorsement of Nasser’s policies of Arab expansionism.” He deplored what he said was State Department haste to appease Nasser, contrasting this action with the Department’s failure to help meet Israel’s defense needs.

Meanwhile, the State Department denied that it had exerted pressures for the grant of the loan which, reportedly, had been opposed by America’s West European allies in the IMF as well as by the U.S. Treasury. A spokesman for the State Department said: “At no time did the Department exert any pressure on the International Monetary Fund or interject political considerations into the negotiations leading to the standby agreement between the IMF and the United Arab Republic.”

The Fund’s action was taken despite an IMF rule which forbids such loans unless the borrowing country adopts strict internal fiscal policies to strengthen its currency, halt inflation and improve its international balance of payments. Egypt, it was pointed out by the West European members of the IMF, has done none of these things. However, under the decisive role played by the Department of State, the loan was voted, according to reports.

It was pointed out here today that the loan comes at a time when Premier Khrushchev, of the USSR, had just offered Egypt a new line of credit for a total of $277, 000, 000, in addition to the Soviet Union’s previous grants totaling $1, 500, 000, 000 in military aid and economic assistance. It was also noted that the IMF put through the loan just prior to the official visit to be paid here, beginning Monday, by Israel’s Prime Minister Levi Eshkol as a state guest of President Johnson.