The Dominion. FRIDAY, JULY 28, 1939. WHAT THE LOAN CONVERSION INVOLVES

Dominion, Volume 32, Issue 257, 28 July 1939, Page 8

The Dominion. FRIDAY, JULY 28, 1939. WHAT THE LOAN CONVERSION INVOLVES

The terms of the .£17,000,000 New Zealand loan conversion announced this morning are startling. The conversion operation has been made possible only through the British Government guaranteeing to find whatever cash might be required to pay off those holders of the old loan who do not wish to renew their holdings. What this guarantee will involve it is impossible at the moment even to guess at, though it seems certain that a substantial amount of cash will be called for. The comment of the Times on this aspect of the tra [ ns ' action, namely, that the British Government cannot be reproached with lack of generosity, is well justified. What will most concern the people of the Dominion is the undertaking entered into by the New Zealand Minister of Finance to pay off the whole of the £17,000,000 within five years.. This is a very serious responsibility. One million of the old loan is to be paid o on the loan falling due early next year; in the same year another £2,000,000 is to be paid off, making £3,000,000 in 1940. In each o_ the four succeeding years £3,500,000 is to be paid. off. In view o the present state of our overseas funds the commitment to pay on these very substantial sums annually looks like a reckless gamb e bn the future state of our overseas market and export prices. With gooc seasons and prices, and the continued restriction of imports, New Zealand may be fortunate enough to be able to show the balance o exports necessary to meet these increased annual obligations, but, as stated, it must be a gamble with a remote prospect of success. Briefly put, the position is this. At the present time it requires a surplus of exports over imports of about £12,000,000 a year in New Zealand money to meet our overseas obligations for debt charges, travellers’ allowances, etc. From the end of this year the Dominion will require to find from £15,000,000 to £15,500,000 a year-this in face of the fact that our balance of exports over imports in the financial year 1938 was only £6,943,000, and in 1939 £3,459,000. Where are the extra millions of sterling funds to come from in the years immediately ahead? What prospect is there of relaxing the import restrictions in face of these new commitments which will make such heavy additional demands on our overseas funds? Thete appears to be very grave danger that the Government is drifting deeper than ever into a financial policy' of reckless expedients which will have further disastrous consequences on trade and business and investment capital. The public are entitled to know from, the Prime Minister at the earliest possible moment exactly how it is proposed to meet the new and startling commitments which the Finance Minister has placed upon the country.