EXCHANGE POOL

Press, Volume LXVIII, Issue 20574, 16 June 1932, Page 8

EXCHANGE POOL

RESTRICTIONS TO BE

REMOVED

REQUIREMENTS OF GOVERN-

MENT MET.

[THE PRESS Special Sorvice.]

WELLINGTON, June 10.

"I have said all along that as as the Government's requirements were met and there was no further need for the exchange credits pool, the export license restrictions would be lifted," said the Prime Minister (the Rt. Hon. G. W. Forbes) in an, interview on his return to Wellington from the south to-day. "As the Government's needs have been met and ajs provision has been made for overseag commitments, the pool will be abolished at the end of this month."

In discussing the steps taken last Docember to provide for adequate overseas credits to meet tho Dominion's obligations abroad, the Prime Minister said he was quite satisfied that the exchange pool had been justified. The times were extraordinary and the Government could not afford to default in its payments, for such an event would seriously impair the country's credit. As things were last December, the Government had to devise some plan to ensure that it would be ablo to meet its commitments, and the establishment of tho exchange credits pool was undertaken with tho cooperation of tho banks on the understanding that it should bo done away with as soon as it was no longer an absolute necessity.

At the time the pool was established it had been estimated that tho Government would require £12,000,000 at the rate of £.1,000,000 per month. In addition to this it was considered that local bodies would require about £2,000,000. Ordinarily, therefore, tho Government would have had to rely on tlio pool for a year and its abolition would not have, been effected until next December or early in January. Reason for Abolition. Explaining the reason for tho abolition of the pool' at the end of six months, Mr Forbes said tho raising of the recent £5,000,000 loan and tho disposal of certain Government securities in London had eased tho position considerably. It was originally anticipated that use would have to bo made of the pool in order to meet Treasury Bills amounting to £4,000,000 falling due. These, however, had been funded and tho disposal of the securities iu addition had meant that the Government needed only about £6,000,000, or half the original estimate from the excliango credits accumulation. Exchange Hate. Mention was made of the exchange rate problem, but Mr Forbes reiterated his previous statements that the Government was not concerned with fixing tho rate in any way whatever. The question was one for -tlio banks. It was believed in some quarters that onco tho pool was abolished the rate of exchange would start to fluctuate immediately. Tliero waß no justification for this assumption for so far as tho Government wbb concerned, tho pool had nothing to do with the rate. The banks would no doubt decide whether tho present rate was the correct one, but tho mere removal of the pool did not mean that there should be a simultaneous! change in tho exchange rate. "When asked what would be the position if ono bank decided to adopt a rato which the othor banks did not favour, he said the bank that broke away would have to be prepared to stand by the rate it fixed, and it was not to be expected that such a serious move would be made without giving full consideration to the implications it might involve. In the same manner if the Government were to take upon itself the responsibility of fixing the rate it would have to provide itself with sufficient reserves to maintain that rate much in the same manner as Great Britain had established a fund of £150,000,000 .to bring about the stabilisation of sterling.