Opposition questions Govt borrowing

Press, 31 January 1986, Page 6

Opposition questions Govt borrowing

PA Wellington A Government loan raised on the United States market last week was at a higher interest rate than the loans it replaced, said the Opposition finance spokesman, Mr Birch yesterday.

The Minister of Finance, Mr Douglas, said earlier yesterday that the Government’s overseas debt restructuring would eventually save millions of dollars by borrowing money at lower interest rates or with an improved spread of currency risks. However, Mr Birch called Mr Douglas’s comments misleading.

“The fact is that the official, Government and Reserve Bank, external debt has risen from $9875 million at the time of the last election to $15,406 million as at June 30, 1985,” he said. Over the same period, the total overseas debt had risen from $16,602 million to $26,393 million. “Therefore during . the

first 12 months of the Labour Government the total overseas debt rose by $3OOO per man, woman and child.” Mr Birch said that some of the debt incurred under National was now due for refinancing, and much of it was already at very competitive interest rates.

Loans to be refinanced included: 1

• A 200 million Swiss franc loan placed in 1979 at an interest rate of 3.75 per cent, due for replacement in January, 1986.

• A 100 million Deutschmark loan placed in 1979 at 6 per cent, due for replacement in February, 1986.

• A 250 million Deutschmark loan placed in 1978 at 5.25 per cent, due for replacement in March 1986.

• A 30 billion yen loan at London Interbank offered rate for Eurodollar funds’ rates, plus 0.0208 per cent, due for replacement April, 1986.

• A 10 billion yen loan (principal outstanding 5 billion yen) placed in 1975 at 9 per cent, due for replacement November, 1987.

• A 350 million Eurodollar floating rate note placed in 1982, at London Interbank offered rate for Eurodollar funds’ rates plus 0.125 per cent, due for replacement April, 1987.

Mr Birch said Mr Douglas had strongly criticised National’s debt rescheduling before the last election.

“Last week $3OO million was raised on the American market at 9.875 per cent.

"All the loans maturing through 1986 have interest rates under this level.

"Mr Douglas will now need to demonstrate publically the value of paying these interest rates on the American market and detail the benefit to New Zealand of rescheduling the debt in this way,” Mr Birch said.