STERLING BALANCES HELD IN LONDON

Auckland Star, Volume LXXVI, Issue 237, 6 October 1945, Page 5

STERLING BALANCES HELD IN LONDON

FUTURE TREATMENT

Liquidation Regarded As Impracticable

Rec. 12.30 p.m.

LONDON, Oct. 5

In a welcome departure from the British banking community's wartime reluctance to make public pronouncements on the country's economic and financial problems, Sir Charles Lidbury, general manager of the Westminster Bank, one of the big five, made the most outspoken references so far in high City quarters to the question of sterling balances.

Sir Charles Lidbury's views in his presidential address to the Institute of Bankers that liquidation of ster- | ling balances of the present magnitude would not appear to be a practical matter and that some material downward revision of contracts seemed imperative arc undoubtedly supported by the vast bulk of economic opinion here. External Liabilities The argument in economic circles is that Britain's external liabilities arising from the war cannot on any sensible appraisal be repaid fully. There is wide agreement, nevertheless, that the sterling balances should be treated differently. The £3.500,000,000 sterling overseas liabilities comprise three different classes. They represent the sterling counterpart of:— (1) Direct Government expenditure incurred abroad in local currencies. (2) In the accumulation of normal reserves and working balances held in London by overseas Governments and bank businesses. (3) In accumulations on commercial account for overseas purchases of a commercial nature made by the Government or private importers. New Zealand's and Australia's balances would greatly differ in this set-up from those of India, Egypt and the Middle East and would seem to call for different treatment. Treatment As Common Costs According to London opinion, Britain may be expected in eventual talks with the holders of sterling balances to press cogently the argument that in all cases, though in varying measures, these liabilities should be treated as common costs of the war. An influential school of thought nevertheless holds that these very liabilities represent a very powerful guarantor of a future outlet for British exports. A leading spokesman of this school is Mr. L. S. Amery, who regards them rather as bullpoints for British industry. This view is rejected by economic opinion generally on the ground that exports of goods or services in satisfaction of sterling debts incurred during the war will not provoke in return any corresponding imports, also because Britain is so preoccupied with housing, industrial re-equipment and modernisation that she will not be in a position to make large-scale exports, except in exchange for imports of food and raw materials, for a considerable time.