CO129-605-4 Government loans 12-7-1946 - 6-1-1948 — Page 92

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attract the holders of Hong Kong notes in South China so that they would substitute new loan for their note holdings. It was subsequently explained that this suggestion was not practicably politic, but my proposal amounts to much the same thing.

30 The matter has been recently raised at a meeting of the Exchange Fund Committee, who were in favour of the suggestion, and as the Exchange Fund investments with the Joint Colonial Fund, amounting on 31st March to £(sterling) 12,500,000, were earning less than 2, the Committee would be quite satisfied to make a loan to the Government for a fixed period at 2%. This saving or 1% in interest would be of very material value to the Colony, for after completing the task of rehabilitation and restoration of public services to their pre-war efficiency, our remaining resources will be quite insufficient to meet the cost of desirable development schemes and extension to social services, I 16, therefore, most important that loan charges should be kept as low as possible, and I should naturally be reluctant to borrow the full sum required for rehabilitation purposes at a comparitively high rate of interest when an appreciable portion of it could be obtained at a lower rate withont injury to the economy of the Colony. The exchange fund now totals some £33,000,000 30 a loan of 23,000,000 or so to this Government would represent less than 10.

4 In these circumstances, I very much hope, on the understanding that borrowings from all sources will not exceed (?& omitted)/150,000,000, you will find it possible to agree to a loan from the Exchange Fund, in which case I would proceed as indicated in paragraphs 4 and 5 of my tolegram No.889. If there is a surplus at the end of the present financial year, it should be possible to keep borrowings materially below the suggested maximum of (2)150,000,000, and if it is made clear when introducing the Loan Bill that the above figure will not in any case be azceeded for the present (though we must not bind ourselves too closely as regards the future) and that part of the money is being obtained at a more favourable rate of interest, the prospectus of the public issue should be much improved.

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