GOLD AND DOLLARS

Evening Post, Volume CXL, Issue 138, 8 December 1945, Page 7

GOLD AND DOLLARS

FALL BEFORE PEARL HARBOUR LONDON, December 7. Gold and dollar reserves in the United Kingdom and other countries in ! the sterling area fell to only £3,000,000 j sterling in April, 1941. This is disclosed by a Government White Paper published last night and containing details given during the British-American loan negotiations of Britain's huge financial contribution to win the war. The low ebb of £3,000,000 was reached soon after the passage of the Lend-Lease Act and before its effects could be fell.

Reserves have to some extent again built up since, largely because the paying of the- United Slates forces in the sterling area brought in considerable dollar .sums, but they are still below pre-war Level and "manifestly inadequate in relation to the immediate needs of the United Kingdom itself and the problem of releasing accumulated balances.'-'

Discussing the causes of the pruspue-

live United Kingdom overseas deficit, the White Paper points out that the loss of export trade during the war was a consequence of a deliberate act of policy aiming at the greatest possible war effort in, building up the United Kingdom as a base of operations nearest to Germany. British export trade shrank to below one-third of the pre-war volume, and could be expected in 1946 to cover not more than half the essential expenditure on a minimum volume of imports and other necessary overseas payments. THE SHIPPING DECLINE. It was explained during the negotiations that British merchant shipping during the war lost more than half its pre-war tonnage, and. despite new buildings, is now below three-quarters of the pre-war figure. The net income from overseas investments in 1945 would be less than half that of 1938. The White Paper stressed the magnitude of the overseas trade deficit that was likely before the equilibrium was restored. It was estimated that the volume of exports would need to I be increased by at least 50 per. cent., possibly 75 per cent., over the pre-war figure to pay for the pre-war volume of imports and make up for the loss of other external earnings. It was hoped that actual cash receipts from exports would attain pre-war level early in 1947. The Government would also have to meet expenditure incurred in maintaining the occupation forces abroad. An estimated deficit in the balance of payments in 1946 of £750,000,000 | sterling, which was reached "with a fairly large measure of uncertainty" was adopted as a starting point for any calculations as to the future position. lit was similarly estimated that there [was likely to be a deficit of £500,000,----000 sterling both in 1947 and 1948. with j more modest deficiencies in 1949 and I ■ 1950 before the attainment of a stable equilibrium. This left a cumulative j deficit of at least £1,250,000,000. I

The White Paper emphasised that the estimates were precarious in view of the uncertain conditions during the years immediately ahead.