The Press MONDAY, MAY 13, 1968. New Zealand And The I.M.F.

Press, Volume CVIII, Issue 31677, 13 May 1968, Page 12

The Press MONDAY, MAY 13, 1968. New Zealand And The I.M.F.

New Zealand last week repaid $U531.25 million to the International Monetary Fund. This was the second such repayment in two months, discharging a debt of $62.5 million incurred in November, 1965. News of these repayments aroused no great public interest, apparently—certainly not the extravagant denunciations which were prompted by the drawings three years ago—but they are a welcome sign of the recovery of the country’s external accounts. Nor should it be forgotten that this debt was not due for repayment till November, 1968. New Zealand still owes the I.M.F. $7O million, drawn in the form of compensatory finance, standby credit, and credit tranche last year. The early repayment of the 1965 drawings shows the Government’s intention towards last year’s drawings, due for repayment in 1970 and 197 L If New Zealand’s overseas exchange earnings remain buoyant until then it would be sound policy to repay the whole IMF debt; if our trade suffers new reverses over the next two years, the Government need have no reluctance to refinance some of this debt through the 1.M.F., still the cheapest source of overseas loans. The 2| years since New Zealand first borrowed from the I.M.F. have been the most difficult for the New Zealand economy since the end of the war. But for the I.M.F. assistance they would have been even more difficult The reasonable conditions suggested by the New Zealand Government last year when it sought increased accommodation from the I.M.F. have hastened the recovery of the economy and improved the prospects of soundly-based prosperity next year. Except for the axe-grinders in their midst New Zealanders who had misgivings about joining the LM.F. should now be able to see the advantages of membership of this institution — apart from the opportunities of lending a helping hand to the other 60 members of the IMF., most of them much poorer than New Zealand. For reasons that are a compound of self-interest and altruism New Zealand should support the I.M.F.’s plans to extend its activities through its scheme for “special drawing rights”. As New Zealand’s representative on the I.M.F.’s board of governors, Mr Muldoon last week voted in favour of establishing these rights, which are comparable to an increase in a bank customer’s overdraft limit The increase in New Zealand’s “ overdraft limit ’’ will be about $l5 million a year, reaching a maximum of $7B million after five years. The increase will be useful to New Zealand in much the same way that ;n increase in a private trader’s overdraft limit gives him the opportunity to expand his business. Just as a general increase in overdraft limits enables business activity within a country to expand, so does an increase in international credit encourage world trade. But the 1.M.F., like any other bank, will need to watch its customers’ accounts to see that increased overdraft limits do not encourage unsound expansion, which is neither in the bank’s interests nor in the customer’s.