Consultations On Sterling Balances

Press, Volume CVIII, Issue 31727, 10 July 1968, Page 14

Consultations On Sterling Balances

(N.Z.P.A. Staff Correspondent) LONDON, July 9. Teams of British financial experts are expected to leave London in the next few days to begin consultations in Commonwealth capitals on sterling balances.

A British Treasury spokesman said this morning that the teams would comprise Bank of England envoys, supported by Treasury officials.

No firm dates had been set for the talks. Timing would depend on when Commonwealth Governments could “accept” the teams. It was expected that New Zealand and Australia would be visited by the same team. Others sources said that the team would explain to the New Zealand Government the United Kingdom’s reason for obtaining the S2ooom credit to buttress sterling.

It is thought that it may offer guarantees covering all or a part of New Zealand’s £som sterling balances against any future major fluctuation in the sterling exchange rate, remote though this might now be as a result of the Basle credit

The team's main aim, however, will no doubt be to dissuade New Zealand from switching its balances to what it might consider to be a more stable currency.

It will emphasise the credit buffer offers an insurance against a second devaluation. The double-edged nature of the Basle arrangement however, was clearly pointed to by leading financial writers in London today, when they emphasised that the new credits were not intended to meet Britain’s own payments

deficit or to cover speculative movements of private shortterm funds. Diversifying Reserves "Their purpose Is purely to provide sterling area countries with an opportunity to diversify their reserves, should they wish to do so, without upsetting the pound,” said Samuel Brittan, economics editor of the “Financial Times.” William Davis, financial editor of “The Guardian" said his view was that some holders would see the Basle arrangements as an invitation to switch, or at least as an opportunity to diversify, without being accused of rocking the boat.

> "The Arabs will certainly . be tempted to do so, and Malaysia—which Is having its palm crossed with aid—will , also want to broaden its fin- . ancial base.” , He thinks, however, that Australia will agree with the ' suggestion of the Chancellor : of the Exchequer (Mr Jen- . kins) that the Basle scheme . should not be used for deliberate large scale diversi- . flcation. i If Australia does go along . with the Chancellor it is ex- . pected to want a firm assur- . ance that no further curbs i will be placed on private port- . folio investment in Australia. ; New Zealand’s attitude could well be similar.