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nature of a conversion operation as I have no doubt that
most holders of the present bonds would accept a lower rate
of interest. In any case they should be given the option.
The term of the loan might be for 25 years from date of each
issue and repayment by means of drawings after the 5th year
for the balance of the 20 years by equal annual payments.
Bonds to bearer in amounts of $10,000, $5,000 and $1,000
would be issued bearing a rate of interest to be fixed at
the time.
3.
Repayment of amual drawings eliminates exchange
and the investing of sinking fund monies in other currencies.
The sinking fund on the present Public Works Loan should
remain invested in sterling securities and its interest re-
invested, otherwise if realised a loss will be sustained
owing to depreciation. The question as to the final dis-
position of this fund which amounts to £98,000 can safely
be left to the future. It will be useful when the annual
drawings exceed half a million dollars.
4.
It would be an easy matter to raise new money this
year to liquidate the advance account, but I cannot recommend
that any such policy be adopted. It would result in
borrowing at, say, 5% and placing the proceeds on deposit at
32% a loss of 11⁄2%. Rather would it be more profitable to overdraw temporarily the current account with the Bank pending
an issue of further bonds which once a comprehensive Ordinance
was in force could soon be done.
5.
From the figures given in the attached return it
is clear that Government cannot for ever finance such large
undertakings from surplus balances. Eighteen months ago it looked as if a loan would be required at the end of 1931, such, however, was not the case and, although $3,583,000 is estimated to be spent in 1933, I hesitate to say at this date
when