COST TO THE CITY

Evening Post, Volume CXV, Issue 37, 14 February 1933, Page 8

COST TO THE CITY

EXCHANGE TO LONDON

HEAVY ADDED BURDEN

EFFECT ON KATES

Through having the good fortune to remit' £81,000 to London on January 18, two days before the exchange rate was increased by the action of'the Government from 10 to 25 per cent., the "Wellington City Council effected a saving to the city of approximately £11,000, and but for the inability of the bank to send the full amount, which the Town Clerk wished to remit, £170,000, the saving would have been very much larger.^ The £81,000 was mjde 'up of £19,000 due for interest and £62,000 for the payment of sinking fund. The interest was for the months of January and February, but the sinking fund was. not required in London till May 1. Normally remittances are made each month, for though the council has endeavoured to send money in advance the bank has been unable to meet the requests. That so large a sum as £81,000 was sent away only two days before the Tate was increased was, therefore, a stroke of very good business. COST WILL BE OVEB £70,000. The saving on that remittance, however, is not nearly all the story, for the loss to the city as a result of high exchange over the period to March 31, 1934, will be've'ry heavy indeed. From January of this year until that date? there will be required in London £194,376 for the payment of interest, and in respect of sinking funds £165,000, a total of £359,376. Of this amount £81,000 of New Zealand money has been sent, equal to approximately £73,630 in London (having regard to the 10 per cent, exchange which was operating when the £81,000 was sent on January 18), leaving to' be found £285,740 approximately between now and March 31, 1934. At 25 per cent, exchange there must be added to this £71,435 the cost of high exchange to Wellington for the period. As the interest and sinking fund payments to be made are in. respect of trading department as well as of general loans, and in some measure in respect of roading loans .'on which the Government finds the capital charges, the full burden will not be. reflected upon the r,ates, but the additional charges will be sufficiently heavy to make city finance' considerably more difficult. A classic example of how the high rate of exchange affects city loans is given in the case of a loan of £165,000, now expired. Hard savings over many years haa built up to meet this indebtedness a fund of £192,000, £27,000 over the amount owing. Today, with exchange at 25 per cent., th 6 sinking fund is still inadequate to wipe out the loan.