CO129-539-12 Loans for public works- military finances 26-2-1932 - 7-3-1933 — Page 101

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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