LOANS MATURING OVERSEAS

Dominion, Volume 34, Issue 138, 7 March 1941, Page 6

LOANS MATURING OVERSEAS

Several times, since the British Government decided to use part of India’s huge holdings of sterling for the repatriation of loans floated in London, the application of the same process to the sterling holdings of the Dominions has been mentioned. When questioned in the House of Commons the Chancellor of the Exchequer refused to give any assurance that this would not be done. Heavy purchases by the British Government have had the effect of building up. the sterling holdings of the Dominions, and the London Financial Times states that “this touches the question of repatriating. Dominion loans, which London financial commentators still insist is the most real possibility in stocks carrying 4 per cent, or higher interest, and optionally redeemable between 1940 and 1945.” The official returns show New Zealand loans maturing in London in 1940-45 of about £41,000,000, but they would not all come within the limits.suggested by the cable message. There are loans amounting to £9,755,000 with interest at 3 per cent, or less. And there is the short-term loan of £14,000,000 with interest at per cent, nego-' tiated by the Minister of Finance during his visit to London in 1939. Originally it was for £16,000,000, but £2,000,000 was repaid last year and the balance will be paid off at the rate of £3,500,000 annually, the transactions being completed in 1944. Excluding the loans carrying interest at less than 4 per cent, and also, the shortterm loan, for which repayment within the next four years is provided, there remains a balance of about £17,210,000 that might be affected if repatriation were asked for by the British authorities. This aspect of war finance has arisen because of the rapid accumulation of sterling holdings in London on account of the overseas Dominions. Apparently it is being contended that, with sales, of British goods to the Dominions now so strictly limited, there is little prospect of the London funds being used, except in Treasury bills yielding a very • small return. But the essential point is the balance that will be available, after the interest and. other services have been met by the borrowers, the debt repayment instalments made, and the import trade in essentials financed.. That is the sum that will be available for whatever purpose the Government may decide, and it is most probable that it would prefer to use any money in London to defray, as far as possible, the cost of the New Zealand Expeditionary Force overseas. The funds for this purpose are at present being provided by the British authorities and constitute a direct draft upon 'future production. It is extremely fortunate for New Zealand that there are no big loans —apart from the short-term issue—maturing in London in the next year or two. The first large maturity to be dealt with will be in 1944, and there will be even larger transactions in the following year. The New Zealand loans falling within the classification mentioned in the recent cable message from London are not large, but if repaid they would absorb sterling balances to such an extent that it would be extremely difficult, if indeed possible, to maintain the debt and other services. The unfortunate interruption of shipping services may reduce trade between the Dominion and the Motherland substantially, but the financial commitments of this country still have to be met, and that can only be done by the provision of sterling holdings through the sale of exports. The British Government, apart from the refusal to make any binding statement on the matter, has apparently made no move, and it can be taken for granted that, if action is considered necessary, there will be ample opportunity afforded the New Zealand authorities to explain the position. Canada and Australia may be in a position to repatriate loans, but the scope for such transactions on the part of this Dominion is~ limited. What it particularly wishes to do is to afford the British Government all the assistance possible by meeting, as far as it can without leaning on the Mother Country, the cost of the troops overseas. That would ease the burden on British finance and also limit the creation of new external debts by this country.