GRATIFYING INCREASE

Otago Daily Times, Issue 27358, 6 April 1950, Page 7

GRATIFYING INCREASE

Britain’s Gold And Dollar Reserves

STERLING AREA EARNINGS

New Zealand Press Association—Copyright Bee. 8.5 p.m. LONDON, Apl. 5. The British press today hailed Sir Stafford Cripps’s quarterly announcement on gold and dollar reserves as Britain’s best effort yet in its battle to close the gold and dollar gap. The newspapers, however, warned against the assumption that the gap has been finally closed. Sir Stafford, in his statement, said Britain’s gold and dollar reserves had risen by 296,000,000 dollars during the first quarter of this year. He said that during the period under review the sterling area had earned a net gold and dollar surplus of 40,000,000 dollars, compared with a deficit of 31,000,000 in the fourth quarter of 1949.

Sir Stafford Cripps said that Britain received assistance under the European Recovery Programme—largely in the form of reimbursement for expenditure already incurred—of 229,000,000 dollars. On March 31 of this year gold and dollar reserves stood at 1,984,000,000 dollars, compared with 1,688,000,000 dollars on December 31, 1949, and 2,241,000,000 dollars at March 31. 1948, immediately before the European Recovery Programme was put into operation. Sir Stafford said: “ The results of the last six months are undoubtedly gratifying, and whatever the results of a more detailed analysis, they reveal that we and the rest of the sterling area have made a further advance in our long and arduous campaign to close the dollar gap.” “ Triumph of Co-operation ” Referring to the successful action bv Britain’s partners in the sterling area in accordance with the understandings reached at the Finance Ministers’ meeting last July, Sir Stafford described it as a “major achievement and a triumph of co-operation by the Commonwealth countries of the sterling area.” The Chancellor said that in looking forward it must be borne in mind that substantial gains over the past six months followed a period in which Britain .lost nearly one-third of her reserves of gold ana dollars. Although admitting that it was not yet possible completely to explain these changes in Britain’s position, Sir Stafford said that some of the chief causes were the renewed flow of dollars, the resumption of buying which had been held up in anticipation of possible devaluation, and the increased demand from the dollar area for many sterling area goods. Another important factor was the reduction in the United Kingdom’s own expenditure in imports from the dollar area, bringing it within the rate of 1,200,000,000 dollars a year laid down In the Government’s programme. Effect of Devaluation Sir Stafford said that other factors which had contributed to the change in Britain’s economic position were the improvement in the position with such hard currency countries as Belgium, Switzerland, and Persia, which had resulted mainly from Britain’s better competitive position following devaluation. There had also been a substantial improvement of Britain’s condition on the invisible account, due in large measure to- a reduction of expenditure over a wide range of transactions. The Chancellor said that' in the early part of the period under review the immediate and short-term effects of devaluation were particularly noticeable. Since then they had naturally declined m importance. This decline had been more than offset in the first three months of the year by other factors, such as the increased demand for sterling; area exports and the further reduction in imports from the dollar area. “We must not be complacent as to these results or over-estimate the progress which is being made,” added Sir Stafford. “To the extent that last quarter’s results benefited by seasonal changes, we must expect that a corresponding seasonal, decline will affect adversely the results of the months immediately ahead of us.” The Chancellor added that, furthermore, there could De no certainty that the present level of the demand for exports from the sterling to the dollar area would be indefinitely continued. The Labour Daily Herald said th 6 chief of the temporary influences working in Britain’s favour during this successful quarter were, first, increased. seasonal receipts from the sale of raw materials by the Commonwealth countries, particularly of wool and cocoa; and, secondly, increased industrial activity in the United States which brought a greater demand for sterling area products. The Times, in a leading article, said the increase in reserves was not the only good news. “The fact that the sterling area was able to earn a small net dollar surplus dring the last three months is even more gratifying. To find another surplus of this kind it will probably be necessary to go back before 1939.” Future Competition The Times said that while the improvement could not be denied, it would be foolish to project the improvement into the future without taxing into account the approach of sterner competition in all overseas The Daily Telegraph said that welcome as it is even after Marshall Aid has been taken into account; the net gold and dollar surplus of 40,000,000 dollars for the sterling area in the past quarter cannot be taken as evidence that the dollar gap has now been finally closed. Non-recurring influences such as American stocktaking could not always be relied upon to assist the sterling area budget. The political correspondent oi the Financial Times said the extent of the increase in reserves was a surprise to everybody. The fact that the gold reserve is now back at the level of £500,000,000 lpre-devaluation), which has been declared to be the safety limit, was registered with satisfaction At the same time, however, there is understood to be a certain amount of concern in Official circles about possible repercussions of the favourable announcement on American opinion, and in particular on Congressional opinion. It is feared that the opponents of Marshall "tid to Britain might make use of the figure ior a reduction of Britain’s share.