The Dominion WEDNESDAY, FEBRUARY 19, 1941. WAR FINANCE AND STERLING HOLDINGS

Dominion, Volume 34, Issue 124, 19 February 1941, Page 6

The Dominion WEDNESDAY, FEBRUARY 19, 1941. WAR FINANCE AND STERLING HOLDINGS

When Parliament assembles—unless a suitable opportunity should be presented before that date—the Minister of Finance should make a statement regarding sterling balances. Most of the. Donumons an India have built up substantial sterling assets. Biitams pure ... have been so extensive, especially for foodstufts and raw that the balance of trade has been heavily m favour of the overseacountries. The largest holder is India, the aggregate having been placed as high as £140,000,000. The British Treasury recently issued an order to ensure, in effect, that large sterling balances would boused to repatriate Indian loans. A leading financial journal has reported that “speculation is rampant about possible further moves embracing New Zealand and Australian stocks. The growth of tnc sterling balances has been noted, and the opinion expressed that eventually at least some of this money will be “diverted to the repan ration of long-term loans and also to the costly sterling de t. It may seem strange that the Dominion should have built up sterling funds, from £6,000,000 in 1938 to £21,000,000 today (to quote the Minister of Finance in his recent speech at Dunedin) and, at .he same time rely upon the British authorities to meet the cost of maintaining New Zealand overseas forces, estimated for the current year at nearly £20,000,000. Interest is paid on the advances at the same rate as "that paid by the British Government for its loans but the question arises whether, with substantial balances m London, the Dominion could not finance, to some extent, its own commitments abroad, and thus lighten the burden on the Mother Country, lhese are the matters upon which the Minister of Finance should make <i clear statement of the Governments intentions. . There are certain unusual factors to be considered. ror the coming year the Dominion is pledged, by the agreement entered into by Mr. Nash in 1939, to-make half-yearly payments of £l,/oO,OW for the liquidation of the short-term loan he secured. That will constitute an additional demand on whatever sterling balances New Zealand may have, but it will meet the wishes of the British authorities and release funds in London for investment. Then there is the question of local body debts maturing overseas at an early date, lhe British authorities want these loans to be repaid, instead of being refinanced. The local body loans maturing in London between 1941 and 1945 total £3,417,000. To repay these issues would make a further demand on sterling funds and the Minister of Finance should state to what extent he expects to be able to meet the position in this particular connexion.

The latest development will not have come as a surprise, especially to the Minister, for the Chancellor of the Exchequer, in his Budget last July, referred to the possibility of Britain borrowing on shortterm from the Dominions to help to meet the terrific cost of the wai. This repatriation of large Indian loans may be an alternative method of making funds available for war issues. It is for the Goxeinment here to say whether it will be able to go beyond the limits of the repayment commitments already entered into. If it cannot go further then it must concentrate its efforts on reducing the call on the British Government for funds to maintain our forces overseas. An informative statement on these matters is due to the public. This is a matter of great importance, and atiects directly the financial position of the country.