BIG SUMS OWING

Gisborne Herald, Volume LXXIV, Issue 22241, 29 January 1947, Page 5

BIG SUMS OWING

DEBTS INDIA AND EGYPT , REPAYMENT PROBLEM (Special Correspondent.) <9- a.rn.) LONDON. Jan. 28. - A nreliminary step towards the settlement of Great Britain’s financial .obligations to India and Egypt—the two largest individual creditors of the sterling account —is being taken with the departure for India yesterday of Sir Wilfred Eady, of the Treasury, and a •representative of the Bank of England. ' India has a sterling balance credit of about £1,300,000,000 and Egypt about £440,000,000. In . addition to discussing the balances with Egypt, negotiations are also pending to cover the Egyptian requirements of “hard” currency during the three months from the end ;pf .March to July 15. Terms of Agreement ‘Under the terms of the American loan agreement Britain is bound to make sterling receipts on current account freely convertible into dollars, or any other currency, after July 15. The existing arrangement whereby Egypt obtains her requirements of dollars from the dollar pool of the ' ' whole sterling area ends on March 31, so that a further temporary agreement is required. “Official information on the intentions of the delegation, or on the pattern of the agreement which would commend itself to the Treasury, have been noticeably lacking,” says the Financial Times. “Nevertheless, it is clear that all sterling balance agree- / ments will be constructed on the same broad plan, largely because no other plan is feasible for the economic situation in which Britain now finds herself” . . „ The total of any given sterling balance is likely, in the first place, to be reviewed and, where possible, reduced. As regards India and Egypt it is suggested that a case for a reduction . can be found in the objects on which much of the money now constituting balances was spent. Some was payment for goods shipped to Britain, but a large portion was expenditure inside these countries on the pay and locally produced supplies for the British forces, and on military installations. It is further suggested in some quarters that the prices of some of these internal ■goods and services were to some extent inflated.

Where is Money to be Spent? To embody in any agreements with India or Egypt undertakings to spend the whole, or the greater part, of their balances in Great Britain, or the sterling area, would be contrary to both the 'letter and the spirit of the American loan agreement. Nevertheless, it is probable that much of “the preliminary talks” will centre around the intentions of the two Governments with regard to the expenditure of their balances. Any undertakings given will remain strictly verbal. . , . Even if Britain’s creditors wish to spend the whole of their balances in the United Kingdom, it is clear that the Treasury cannot afford to allow more than a proportion of this country’s annual production to be devoted to the liquidation of past debts.