The Press TUESDAY, MAY 16, 1961. Expensive Isolation

Press, Volume C, Issue 29514, 16 May 1961, Page 14

The Press TUESDAY, MAY 16, 1961. Expensive Isolation

The urgency of New Zealand’s need to rebuild her overseas reserves is underlined by the terms of the loan to be floated on the London market. Six per cent, stock, maturing in Hi years, will be offered at £9B 10s a £lOO. The New Zealand Government hopes to raise £2O million from this loan. By offering the stock at a discount, the Government is paying the London investor an effective £6 3s 8d per cent This must surely be one of the highest rates of interest paid for a New Zealand loan for many years. Announcing the Government’s decision to go on the market in London, the Minister of Finance (Mr Lake) said there was “ already a heavy demand “ in London for loan “moneys”. To “jump the “ queue ” New Zealand had to “meet the market”; other would-be borrowers are quite prepared to offer returns of 6 per cent, or better. The Joan is necessary “ in “ view of the present re- “ latively low state of our “ overseas reserves ”, Mr Lake said, in a cryptic understatement. Overseas reserves were less than £53 million two weeks ago—£s6 million below the comparable 1960 figure, £34 million below the comparable 1959 figure, and only

£4 million above the comparable figure in 1958, the last “crisis year”. No less alarming than the present level of reserves (which is sufficient for little more than two months' import payments, at recent rates of payment), is their failure to show their usual seasonal recovery this year. In the last four months they have fallen £ 8 million, whereas in 1960 they rose, £24 million, .and in 1959. £3l million over the samel period. The seasonal downturn in the country’s! reserves will begin in two months or so; and they must be built up in the meantime. This hasty recourse to the' London market in times of' emergency, twice within' three years, could have I been avoided if New Zea-| land had been a member of j the World Bank and Inter-' national Monetary -Fund. The need for overseas i borrowing to tide thei country over temporary j emergencies is certain to J recur (though not, one; hopes, at three-yearly I intervals). If the current application for membership of the World Bank and I.M.F. is approved by Parliament future borrowing should not be as expensive as £6 3s 8d per cent. This I figure should be pondered! by the opponents of the i World Bank, inside Parlia-' ment and outside.