INTEREST CHARGES

Dominion, Volume 25, Issue 260, 29 July 1932, Page 11

INTEREST CHARGES

New Zealand’s War Debt POSSIBLE REDUCTION Favourable Opportunity (By Telegraph.—Press Assn.— Copyright) Ottawa, July 27. The leader of the New Zealand delegation to the Imperial Conference, Mr. J. G. Coates considers that Britain’s successful £2,000,000,000 War Loan conversion may have an Important bearing on New Zealand’s external interest charges. New Zealand owes the British Government £24,000,000, representing 5 per cent funded war debt. Mr. Coates considers that there is a prospect of reducing this to the same 3$ per cent, rate as the British Conversion Loan. The presence of the Chancellor of the Exchequer, Mr. Neville Chamberlain, at Ottawa happily provides a favourable opportunity for discussing the matter. EFFECT OF PROPOSAL’ War Debt Obligations £11400,000 INVOLVED Misconceptions which might arise concerning any request that might be made to Great Britain for a reduction in interest rates on the Dominion’s war loan, as hinted in the foregoing message from Ottawa, were discussed by the Prime Minister, Rt Hon. G. W. Forbes, when questioned on the subject yesterday. Mr. Forbes said it was correct to state that New Zealand’s funded wardebt to Britain at present totalled approximately £24,000,000. However, the amount borrowed by Great Britain and loaned to New Zealand, and which was included in the present British conversion of £2,000,000,000, was £11,100,000. This sum of £11,100,000 was included in the Dominion’s original funded war debt of £27,532,000, but nothing apart from this was affected by the present British conversion. Repayments on account of New Zealand’s funded war debt since the funding in 1922 amounted to £3,431,000, and of thiS'the amount repaid in respect of the £11,100,000 was £890,000, leaving £10,210,000 outstanding. Interest on the funded debt amounted to 5 per cent., and a reduction to 3$ per cent would mean a saving to New Zealand of £153,000 for the first year, the saving being reduced as the principal was reduced by capital repayments. It had been intended when the British conversion had been completed to discuss the question of interest on New Zealand’s funded war debt with the British authorities, Mr. Forbes said. Now that the success of the onverslon scheme was practically assured, both. Mr. Coates and Mr., Stewart would no doubt take the question up with th* members of the British Government al Ottawa, and especially with the Chancellor of the Exchequer, Mr. Neville Chamberlain, whose presence in Canada would be a great advantage. FUNDING DETAILS Annual Payments OVER 30 YEARS REQUIRED According to the funding agreement drawn up in 1922 between Sir Otto (then Mr.) Niemeyer, on behalf of the Imperial Government, and Sir James Allen, then High Commissioner for New Zealand in London, on behalf of the Dominion Government, the total amount of the debt funded was £27,530163 The Dominion Government was to pay the Imperial Government interest at the rate of £4/19/5.88 per cent, a year on this sum* or such part of it as remained unpaid from time to time, interest being payable half-year-ly on June 1 and December 1. In addition to the interest payable bv the Dominion, it was further agreed that the Dominion should pay to th Imperial Government _ half-yearly- in reduction of the principal, such sums as, when added to the interest, made a total annual payment of 9 - 9 16/8, being equivalent to £6 per cent, per annum on the total principal of the debt. This total payment was to continue until the principal was wholly r The following table shows the individual loans which were funded, and it will be seen that the 1929-47 5 per cent issueamounts to £11.100.000 Thu represents the amount included in the present British conversion scheme. p.c. debentures, 1925-45 . 5 p.c. debentures, «®’- 4 ' “ 31 p.e. debentures, 1925--S . 1,000,000 5 3-8 p.c. debentures 3} p.c. book debt •• •• 40’510 5 p.c. book debt •• •• 40 ’ 51q Total £27,532,163 On the basis set out in the agreement of September 6, 1922, the total funded debt would be repaid in a little under 36 years, counting fro “ f 1 This means that the seventy second'instalment payable at the end of 36 years, would be slightly le.s m amount than the preceding instalments. .