OVERSEAS ISSUES

Dominion, Volume 34, Issue 42, 13 November 1940, Page 6

OVERSEAS ISSUES

Repaying Local Body Loans DRAIN ON STERLING RESERVES

i. By

Lux.)

When he spoke in Auckland recently the Minister of Finance mentioned some of the exceptional items that had reduced the Dominion's sterling reserves. In lbe 21 months ended September 30, Mr. Nash said, permits for remittances, apart from those issued for imports or for debt services, had amounted to £25,000,000.

Among the items was one of £3,600,000 for the repayment of local body loans that had matured at Home. The Minister explained that the British Government had asked that repayment should be made of such loans falling due during the war. It is one of the ways adopted by the Home authorities for mobilizing financial strength. They have taken over foreign securities, especially those that can be sold on dollar markets, and expect to make the exchange equivalent of some hundreds of millions of pounds available in thio way. In addition, if maturing loans overseas are repaid, then the money will become available for investment iu British war issues and thus assist the Treasury. It is admitted that the policy has its drawbacks. It means a reduction of Britain’s overseas investments and. thus, a fall in the return to be derived from them but tbe 'immediate needs are imperative. In the past 21. months —an unusual •period to take—New Zealand has had to repay in London the substantial sum of £3,600,000 on account of maturing local body loans. The total is larger than had been expected because the official returns gave the total of overseas maturities “prior to and during 1940” as £3,138,000. It is unfortunate that such a large sum has had to be found at this time, adding as it does to our import restrictions, but. there is a possibility that in the next few years this item will uot loom quite so prominently. Local body maturities in London in 1941-15 are said to be only £3,417,200, but a great deal will depend upon how they are spread. . In most cases, in connexion with the loans that have been repaid, the local authorities concerned had substantial sinking funds available but their calculations have been upset by the very high exchange rates ruling for transfers on London and there must have been a substantial margin that had to be covered in some way. It would be of interest to know to what extent the loans have been repaid (1) out of accumulated sinking funds; (2) out of local issues, and (3) out of advances from the State. Fortunately apart from the halfyearly instalments for the 1939 loan—they will total £3,500,000 next year—there arc no State loans maturing in London before 1944. If the repayment of local body issues is spread over the years 1941-45 the drain on funds for this purpose may have passed its peak, but there is need for a detailed statement of the position by the Minister of Finance. Available trade balances are being used for capital payments and Mr. Nash should explain how he intends to bring the transactions within the framework of his financial proposals for tbe year.