CANADA LENDING TO BRITAIN

Press, Volume LXXXII, Issue 24820, 9 March 1946, Page 7

CANADA LENDING TO BRITAIN

Credit of £281,000,000 Arranged

(N.Z. Press Association—Copyright) LONDON, March 7. Canada is making a loan to Britain of £281,000,000 to be repaid over a period of 50 years after January 1, 1951, and carrying from that date interest at 2 per cent. The Prime Minister (Mr Attlee) made this announcement in the House of Commons to-day after the news was received of the signature of the loan agreement at Ottawa. (

Mr Attlee said' both Governments desired to make constructive agreements enabling Britain to meet the serious problems she must face after the losses and destruction caused by the war. There was an article providing for the waiving of interest payments in certain defined circumstances.

Mr Attlee added that, the agreement provided that the interest free loan granted to Britain by Canada in 1942 would be continued on the same basis until January 1, 1951. The two Governments before that date would discuss how to treat the service and repayment of any balance of the 1942 loan then outstanding. The agreement cancelled the 425.000.000 dollars indebtedness of Britain for the Commonwealth Air Training plan. The two Governments had also agreed to accord each other in regard to exchange controls and import restrictions treatment not less favourable than that provided for in any agreement which either Government made with the Government of any other country. Mr Attlee said the agreement would enable Britain to overcome the temporary financial difficulties of purchasing from Canada, contribute to the development of trade, between the coun-* tries, the removal of trade barriers, and also the free use of currencies for international trade. These policies were in the vital interests of the two countries. Both Governments believed they had taken essential steps for the expansion of world trade.

Settlement of Claims Mr Attlee said Canada and Britain also had concluded a supplementary agreement arranging for the settlement of all remaining claims arising out of the war effort of both countries. This agreement provided that Britain would cancel all claims on Canada outstanding as at February 28, 1946, and pay Canada 150,000,000 dollars. Canada would cancel all outstanding claims on Britain not otherwise dealt with, including the cost of food and other supplies delivered by Canada to Britain between V-j Day and February 2b 1946.

“I want to express our cordial appreciation of the sympathetic approach to our mutual problems shown by the Canadian Government,” said Mr Attlee. “I state my conviction that the agreement will be of great value to our common interests.”

More complete details of the agreements were made available after Mr Attlee’s announcement, describing the method of repayment. The amount < credit drawn by December 31, 1951, is to be repaid in 50 annual instalments beginning on December 31, 1951, with interest at the rate of 2 per cent, per annum. The interest for the year 19b. is to be computed on the amount outstanding at December 31, 1951. In succeeding years the interest is to be computed on the amount outstanding on January 1 each year. The method of repayment of the succeeding instalments is as follows:—The 49 instalments of principal repayments and interest shall be equal, and calculated at the rate of 3,182,300 dollars for each 100,000,000 dollars of credit drawn by December 31, 1951. The fiftieth annual instalment will be at the rate of 3,184,073.665 dollars for each 100,000,000 dollars. Each instalment will consist of the full amount of interest due. The remainder will be principal to be repaid. These provisions are subject to waiver provisions.

Waiving of Interest Canada agrees to waive the interest on the following conditions: (1) if Britain finds a waiver necessary in view of existing and prospective conditions of international exchange and the level Of Britain’s gold and foreign reserves; (2) if the International Monetary Fund certificates that come in Britain from home-produced exports plus the net income from invisible current transactions is on the average over the five preceding years less than the average annual amount of Britain imports from 1936 to 1938 this average figure is fixed at £866.000,00 subject to adjustments for changes in price levels; and (3) if interest payments are waived on any credit to Britain to which a similar waiver provision applies. The Governments in addition agree to consider what changes they Would make in provisions for credit if there

is any major change ih the international financial situation materially affecting the prospective benefits and obligations. Although the text of .the letters between the Canadian Minister of Fi* nahce (Mr J. U Ilsley) and the Chancellor of the Exchequer (Dr* Hugh Dalton) released to-day affirms the understanding that the non-diS6rim» inatory trade Ciatise, also the clause relating to the 1942 interest free loan and the Air Training Plan clause Will not be implemented Uhtil it is khowh whether the American loan is approved. a high London financial expert stated that Canadian implementation of the loan Agreement would proceed before the tfecisfofi of the United States Congress. The loan re*

quires ratification by the Canadian Parliament, but not. the British Parliament and is effective from the moment it is approved by the Canadian Parliament. Mr W. J. Brown (Independent), commenting in the House of Commons on Mr Attlee’s statement, asked whether it was not conceivable that a similar arrangement between Britain, Australia, New Zealand, South Africa and India might spare Britain as a nation the humiliation of what was going on In Washington. Mr Attlee said there was a differ*ence between loans within the sterling area and loans within the dollar area. Mr R. De la Bere (Conservative) said: The Dominions have behaved magnificently. (Cheers,) Mr Attlee added that the gratitude of the House would be conveyed to the Canadian Government. Mr R. A. Eden said he and his friends cordially welcomed the loan. It seemed a satisfactory agreement which would carry immediate advantages to Britain and they hoped equal advantages to Canada. Sir Wilfred Eady, Of the British Treasury, told a press conference in Ottawa that more than 1,000,000,000 dollars loan of the 1,250,000,000 will be spent in Canada within two years. ‘‘We will not be bound by the agreement to spend every penny in Canada, but I happen to know the British programme for purchases in Canada for the next two years,” said Sir Wilfred Eady. He added that one aspect of the loan was that whatever any Canadian exporter earned in sterling could be exchanged into another currency. The effect would be that Australia, for instance, could obtain Canadian dollars in London for purchases in Canada. Therefore some of the loan might be spent in Canada by sterling countries othA than Britain. Britain's first purchases would bfe food, then manufactured goods. In the British limitation of imports Canada would have to receive the same treatment as the United States and other countries. There would be no preferred treatment under the programme. “The Canadian loah On the basis of population outranks the proposed American loan,” said Sir Wilfred Eady. “This is not a slight on the United States, but merely a statistiThe Canadian Press says the Cam adian loan was made in expectation that the United States Will approve of 3,750.000,000 dollars to Britain. If Congress rejects the loan it will mean that the main features Of the BritishCanadian agreement will be scrapped and negotiations opened. A finance Department official said the average interest rate for Britain would be between 1.62 and 1.64 per cent. Britain would have td pay all the interest estimated at 25,000,000 to 30,000,000 dollars a year between how and 1951, after Whieh she would have to pay thS difference between 1.62 per cent, and the rata At Which 4 Canada coUld borrow money. This might cost 12,000,000 dollars a year* Canada’s financial Assistance to Britain ih loans and outright gifts, including tq-day’s loan of 1,250.000,000 ddb lars totals about 4,950,000.000 dollars. Canada in 1942 lent Britain 700,000,01)0 dollars, of which about 150.000,000 had bebn repaid. There was also an outright gift Of 1,000,000,000 in 1942, while mutual, did totalling approximately 2 ? oo0,ooo.ooo doners nad been, given Since then.