WORLD BANK GRANTS NEW ZEALAND LOAN

Press, Volume CIV, Issue 30936, 17 December 1965, Page 1

WORLD BANK GRANTS NEW ZEALAND LOAN

£lsm For Railways, £7m For Power

<New Zealand Prest Aisociation) WELLINGTON, December 16. Two loans to New Zealand amounting to 623 million dollars or £223 million have been announced by the World Bank. x One loan of £l5 million will be spent on modernising the railways and the other of £73 million, will be spent on power development.

The railways loan will be used to buy additional main line and shunting diesel locomotives, the rail-road ferry Aranui now being built in Britain and additional and replacement rolling stock.

The power development loan will be used to pay the part of the cost of building Marsden Point thermal power station which represents a direct charge to overseas funds.

The Minister of Finance (Mr Lake) said it was expected Marsden Point power station would be in production by July, 1967, and that the equipment for the railways would be obtained over a period of three years or more.

The Minister said as the loan funds were to be used to help with specific projects which comprised part of New Zealand's large development programmes for transport and electricity generation, they would be “uplifted as and when required" by the progress of the work.

“This means,” said Mr Lake, “that the overseas exchange provided by the World Bank will not be available to augment directly the reserves available to finance current overseas exchange transactions.” Precise Control The World Bank has previously lent New Zealand £11.6 million towards the cost of the inter-island power transmission system and £3 million for harbour development.

“While relatively small as a proportion of New Zealand's growing total capital requirement, these and the additional loans now granted will result

in economic gains far in excess of their face value.” Mr Lake said the terms of the World Bank loan were “much more favourable” than could be obtained in the open market.

He said the earlier loans carried an interest rate of 5} per cent—and in spite of a general rise in the rate which the bank had to pay at present for its funds for lending, the further loans now granted were at 61 per cent for terms of 15 years. “Repayments will not begin immediately,” said Mr Lake. “Time has been given for the assets created by the loans to become revenue earning.”

Amortisation of the electric power loan will begin on March 15. 1969, and amortisation of the railway loan on April 15. 1970. Mr Lake said the government applied to the world bank for a £22.3 million loan because "it would be asking

too much” of the present generation of New Zealanders to find all the capital needed out of current national income. Previous Loan He said this was particularly true in an economy in which overseas exchange used for long-term capital purposes represented an investment of “much more” in terms of current national income.

Mr Lake said the Government needed the loan because the rapid pace of economic development in New Zealand required a commensurately high level of capital formation. “The decision of the Wond Bank to lend New Zealand capital follows a careful examination of the economic implications of the development programmes for which financial assistance was sought,” he said. The Minister said that'the World Bank’s agreement to the loan was confirmation from an independent agency that the proposals were soundly conceived and of long-term and basic economic 1 benefit to New Zealand. "The support of the World Bank will make a valuable contribution to the increasing pace of development which is now being achieved in New Zealand,” he said.