WORLD BANK RATES RISE

Press, Volume CV, Issue 31007, 12 March 1966, Page 1

WORLD BANK RATES RISE

(N.Z.P.A.-Reuter—Copyright)

WASHINGTON, March 11.

The World Bank plans to boost its interest rates on loans to the more economic-ally-developed countries such as Japan, New Zealand, Italy and Australia, official sources said today.

The move follows yesterday’s disclosure by the bank of an increase from 5.5 to 6 per cent in its interest on loans to underdeveloped nations, which make up the bulk of the international in-

stitution’s 1000 million dol-lars-a-year current credit programme.

The interest rate for the loans to more economicallydeveloped nations will range now from 6.25 to 7 per cent, depending on maturity. Previously the interest rate range had been 6 to 6.5 per cent. The dual rate schedule for underdeveloped .nd wealthier nations has been in force by the bank for more than a year.

The bank feels the wealthier nations are more able to borrow in world apital markets than the poorer countries and thus should be charged a higher rate. Borrowing Costs

The higher interest rates: by the bank reflect higher borrowing costs in capital mar-

kets, World Bank officials have said. In another financial development, informed sources said today that the World Bank, to raise more capital, had sold a 100-million-dollar private issue of. bonds to foreign central banks and governments. The rate of interest was 5.25 per cent a year, compared with 4 3-8 per cent last September on a similar bond sale.

The plan tn boost its rates of interest to the more economically-developed countries came as a. surprise to the Minister of Finance (Mr Lake) in Christchurch last evening. “I know nothing of this,” he said. “One thing 1 am sure of is that .it will not affect any of the loans New Zealand

has already negotiated with the bank.” “We will draw on these loans as we spend the money,” he said. Mr Lake said the most recent loan was negotiated (if he remembered correctly) at a 6i per cent interest rate. This was, he said, higher than usual. He added that the proposed new interest rate was quite comparable with rates which had to be paid on the London and New York loan markets. He considered the increase was a reflection of the higher costs the World Bank had to pay on the money it borrowed itself. £36.7m Borrowed The Press Association reported from Wellington that in two years and a half New Zealand had borrowed £36,700,000 from the World Bank. The money was for power and harbour development and modernisation of the railways. The first loan, of £2,800,000 for the development of five ports, was announced on November 13, 1963. The rate of interest on the 25 year loan is 5i per cent with no capital repayment for the first four years.

On March 13, 1964, a loan of £11,600,000 was announced. This sum was used for meeting overseas costs of the Cook Strait power cable. This 20-year loan carries 51 per cent interest with repayment commencing in September this year. On December 16 last, two loans of £l5 million, for railways modernisation, and £7,300,000 for the overseas cost of the Marsden Point thermal power station, were announced.

The 15-year loans have interest of 6} per cent. Membership of the bank cost New Zealand £600,000 in gold and its 10 per cent share subscription called up is £54,000 in New Zealand currency and £5,300,000 in non-interest-bearing non-nego-tiable Government stock deposited in the name of the World Bank with the Reserve Bank of New Zealand. New Zealand is represented on the bank’s board of governors.