SENSATIONAL DROP

Ashburton Guardian, Volume 70, Issue 71, 5 January 1950, Page 5

SENSATIONAL DROP

STERLING AREA GOLD AND DOLLAR DEFICIT THREE CONTRIBUTORY CAUSES (N.Z.P. A.—Copyright) (Rec. 10.5 a.m.) LONDON, Jan. 4. The Chancellor of the Exchequer (Sir Stafford Cripps) today disclosed a sensational drop in sterling area’s nejt gold and dollar deficit. He said that the net gold and dollar deficit in the quarter ended December 31 mounted to 31,000,000 dollars (£11,000,000 sterling at the present rate of exchange), compared with 539,000,000 dollars (£131,000,000 sterling at the pre-devaiua-tiorv rate of exchange), in the third quarter of last year. Gold and dollar reserves at December 31 totalled £603,000,000, compared with £509,000,000 on September 9. Both figures are calculated in pounds after devaluation.

Sir Stafford Cripps said that three main causes had contributed to the smallness of the deficit in the last quarter of 1949. The first was the inflow of dollars following devaluation, representing deferred payments for sterling area goods and services tracted for earlier. This was entirely non-recurrent. The second cause was resumption of purchases on a fairly heavy scale by United States importers and part of those receipts was also of a non-recurrent nature. The third cause was the improvement in the basic sterling area balance of payments with the dollav area. a . Explaining the figures, Sir btaitoid Cripps said they showed that in the fourth quarter of 1949 the net gold and dollar deficit fell to the low figure of 31,000,000 dollars. “Since devaluation gold and dollar reserves have risen from the low point of 1,340,000,000 dollars or at the o'ld rate of exchange £330,000,000 sterling to 1 658,000,000 dollars —£416,000,000 at the old rate and £603,000,000 at the present rate.” It was a very large increase and had taken place fairly uniformly over the whole qf the thiee months. It demonstrated that the people had not been unduly hesitant in acquiring sterling ifoi: gold or dollars. “Certainly this state of affairs cannot prove or show any weakening in sterling generally, and to that extent it is certainly satisfactory,” Sir Stafford said. A great deal remained to be done if the real deficit was to be eliminated as soon as possible and anyhow before Marshall Aid came to an end. Even after the recent increases they had still not made up the losses of revenue which had occurred during the period of Marshall Aid. The reserves were still 5,00,000,000 dollars less than they were when the European Recovery Programme began in April, 1948. “We have reaped some benefit from devaluation, partly temporary and partly* permanent, but its success as a medicine for our economic ills still needs-to be assured by the efforts we devote to exporting sufficient goods to dollar and hard currency areas,’ said the Chancellor.