CONVERSION AND EXCHANGE.

Auckland Star, Volume LXVII, Issue 103, 2 May 1936, Page 8

CONVERSION AND EXCHANGE.

The interesting feature of t-lie Dominion's coming loan operation is the proposal to redeem part of the debt. In this the Government is following the lead of its predecessors. Last July, when a loan of £10,000,000 became callable, Mr. Coates converted £.5,000,000 and repaid the balance. To-day Mr. Nash proposes to convert £4,000,000 and pay off £1,870,000. This may be intended to impress our London creditors or to use up some portion of the large accumulation of Reserve Bank credits. Possibly both considerations have influenced the Government. There would be no difficulty from the viewpoint of funds in paying off the whole £6,000,000, but that would be folly when money can be raised around 3 per cent. Is it wise to pay back any part of the loan at this interest level? The answer depends on whether a 3 per cent conversion could he arranged without some repayment which thus demonstrates our financial strength. It is costly to repay debt at the present rate of exchange, • and the Government knows this. In this case several years' interest saving will-be given away. The Government must have considered this in relation to the future of the exchange, and its action will therefore be interpreted as an indication that it does not intend to bring the exchange down.