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FINANCIAL AGREEMENT BETWEEN THE
GOVERNMENTS OF THE UNITED STATES
AND THE UNITED KINGDOM
It is hereby agreed between the Government of the United States of America and the Government of the United Kingdom of Great Britain and Northern Ireland as follows:-
1. Effective date of the Agreement.
The effective date of this Agreement shall be the date on which the Govern- ment of the United States notifies the Government of the United Kingdom that the Congress of the United States has made available the funds necessary to extend to the Government of the United Kingdom the line of credit in accordance with the provisions of this Agreement,
2. Line of Credit.
The Government of the United States will extend to the Government of the United Kingdom a line of credit of $3,750,000,000 which may be drawn upon at any time between the effective date of this Agreement and 31st December, 1951, inclusive.
3. Purpose of the Line of Credit.
The purpose of the line of credit is to facilitate purchases by the United Kingdom of goods and services in the United States, to assist the United Kingdom to meet transitional post-war deficits in its current balance of pay- ments, to help the United Kingdom to maintain adequate reserves of gold and dollars and to assist the Government of the United Kingdom to assume the obligations of multilateral trade, as defined in this and other agreements.
4. Amortisation and Interest.
(i) The amount of the line of credit drawn by 31st December, 1951, shall be repaid in 50 annual instalments beginning on 31st December, 1951, with interest at the rate of 2 per cent. per annum.
Interest for the year 1951 shall be computed on the amount outstanding on 31st December, 1951, and for each year thereafter interest shall be computed on the amount outstanding on 1st January of each such year.
49 annual instalments of principal repayments and interest shall be equal, calculated at the rate of $31,823,000 for each $1,000,000,000 of the line of credit drawn by 31st December, 1951, and the fiftieth annual instalment shall be at the rate of $31,840,736-65 for each such $1,000,000,000.
Each instalment shall consist of the full amount of the interest due and the remainder of the instalment shall be the principal to be repaid in that year. Payments required by this section are subject to the provisions of Section 5. (ii) The Government of the United Kingdom may accelerate repayment of the amount drawn under this line of credit.
5. Waiver of Interest Payments.
In any year in which the Government of the United Kingdom requests the Government of the United States to waive the amount of the interest due
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in the instalment of that year, the Government of the United States will grant the waiver if :--
(a) the Government of the United Kingdom finds that a waiver is necessary in view of the present and prospective conditions of international exchange and the level of its gold and foreign exchange reserves, and
(b) the International Monetary Fund certifies that the income of the United Kingdom from home-produced exports plus its net income from invisible current transactions in its balance of payments was on the average over the five preceding calendar years less than the average annual amount of United Kingdom imports during 1936-8 fixed at £866,000,000, as such figure may be adjusted for changes in the price level of these imports. Any amount in excess of £43,750,000 released or paid in any year on account of sterling balances accumulated to the credit of overseas governments, monetary authorities and banks before the effective date of this Agreement shall be regarded as a capital transaction and therefore shall not be included in the above calculation of the net income from invisible current transactions for that year. If waiver is requested for an interest payment prior to that due in 1955, the average income shall be computed for the calendar years from 1950 through the year preceding that in which the request is made,
6. Relation of this line of credit to other obligations.
(i) It is understood that any amounts required to discharge obligations of the United Kingdom to third countries outstanding on the effective date of this agreement will be found from resources other than this line of credit. (ii) The Government of the United Kingdom will not arrange any long term loans from Governments within the British Commonwealth after 6th December, 1945 and before the end of 1951 on terms more favourable to the lender than the terms of this line of credit.
(iii) Waiver of interest will not be requested or allowed under Section 5 in any year unless the aggregate of the releases or payments in that year of sterling balances accumulated to the credit of overseas governments, monetary authorities and banks (except in the case of colonial dependencies) before the effective date of this agreement, is reduced proportionately, and unless interest payments due in that year on loans referred to in (ii) above are waived. The proportionate reduction of the releases or payments of sterling balances shall be calculated in relation to the aggregate released and paid in the most recent year in which waiver of interest was not requested.
(iv) The application of the principles set forth in this section shall be the subject of full consultation between the two Governments as occasion may
arise.
7. Sterling Area Exchange Arrangements.
The Government of the United Kingdom will complete arrangements as early as practicable and in any case not later than one year after the effective date of this agreement, unless in exceptional cases a later date is agreed upon after consultation, under which immediately after the completion of such arrangements the sterling receipts from current transactions of all sterling area countries (apart from any receipts arising out of military expenditure by the Government of the United Kingdom prior to 31st December, 1948, to the extent to which they are treated by agreement with the countries
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