The Great Loan Land

Northern Advocate, 28 July 1939, Page 6

The Great Loan Land

AS in the case of the credits announced last week, the arrangement made for conversion of New Zealand’s £17,000,000 loan, which falls due at the end of this year, will merely amount to a relatively brief respite unless steps are taken to restore the financial stability of the country, and place its revenues and outgoings on a more secure basis. The “Financial New's” evidently considers that New Zealandwill be well able to meet her commitments in this respect. It is sincerely to be hoped that this will prove to be the case. In the past, transactions of greater magnitude have been negotiated and completed with ease, and with no undue publicity except of a complimentary character, in the form of London references to New Zealand’s excellent financial reputation. To-day circumstances are different. When the maturing of this loan was first discussed, in the halcyon days of early 1938, the Government was full of optimism and assurance, and made no secret of its intention to extinguish the loan by the simple process of paying it off from funds available in London. But, unfortunately, far from funds being available for the repayment of the loan, only a fraction of the loan is to be repaid now, and the balance will run on for five years more, with provisions for reductions at the rate of £2,000,000 in 1940, and £3,500,000 in each of the following years. The rate of interest on the outstanding balances, 31%, is reasonable enough. With the provision that has been made for automatic repayment from export funds, the rate of interest is really a very good one from the investor’s point of view. Actually, it is a well-safeguarded But if the London investor is well provided for, what of New Zealand ? Force of circumstances has compelled the Government to accept terms by "which proceeds of export are automatically “earmarked’’ for capital repayment under this loan, and unless export revenue is buoyant it may place a severe strain on the Dominion to meet these commitments.