The Hokitika Guardian WEDNESDAY, FEB. 22, 1922. FUNDING THE WAR DEBT.

Hokitika Guardian, 22 February 1922, Page 2

The Hokitika Guardian WEDNESDAY, FEB. 22, 1922. FUNDING THE WAR DEBT.

Arrangements have apparently teen completed for the funding of the large amount borrowed by New Zealand from the Imperial Government for war purposes (says the “New Zealand Herald” editorially). Of the total war debt at the end of the last financial year £55,198,325 represents loans raised in New Zealand, arid £26,340,2-15 Imperial advances, almost the whole of the latter amount having been lent on the security of memoranda of agreement without provision as to the terms of re payment. Interest has been paid al the rate of 3£ per cent on £1,168,421 4J tier cent on £4,131,313, and 5 per.

.cent on £21.040,510 the interest charges amounting to £l, 278,-829. In addition, payments of 1 per cent per annum have een made into a sinking fund with a view to the extinction of the debt in. 40 years, this provision applying to all war loans. An arrangement similar in principle to that made between the Imperial and the Australian Governmens a year ago has now been made for the funding of the whole debt. In the case of the advances to Australia, the Imperial Treaury agreed to the funding of £92,038,559 on the terms that the Commonwealth Government is to pay 6 per cent on tho whole amount—£s,s22,ooo a year—covering i interest and sinking fund of 1 per cent., thus extinguishing the debt in 37 years by annual payments. According to Mr Massey’s statement, the i New' Zealand Goernment is to pay 6i per cent, including 1 per cent sinking fund for 37 years. This will involve an increase of £169,884 in the annual liability to the Imperial Government which will now be at tho rate of £l,•659,118. The principle of this ar- j

rangement is, of course, familiar to all who have obtained loans from the St a te Advances Department, and in some respects has advantages over the ordinary method in regard to the public debt of accumulating annual contributions and the interest earned by their investment for the ultimate discharge of the capital liability. Under the latter system the sinking funds are available for lending to sellers, workers and looal authorities, but it involves eventually the difficulty of realising investments to meet the maturing debt. The Imperial Treasury’s system relieves the Government of both the embarrassment of a large ‘‘floating” debt and the task, not necessarily a simple one, of maintaining the investment of a sinking fund for forty years.