CFM(67)5
11th September, 1967
SECRET
COPY NO.
HER MAJESTY'S TREASURY
COMMONWEALTH ECONOMIC CONSULTATIVE COUNCIL
49
MEETING OF FINANCE MINISTERS SEPTEMBER, 1967
STERLING AREA BALANCE OF PAYMENTS AND THE POSITION OF STERLING
Brief by H.M. Treasury
Summary
The Chancellor will be expected to introduce a report on the outlook for the Sterling Area's balance of payments (F.0.(67)4) prepared by United Kingdom officials during July and the early part of August, and incorporates forecasts and comments received from Commonwealth countries. It will be discussed in Trinidad at meetings of Commonwealth finance officials on the two days immediately before the Finance Ministers meet. (In the event of any major revisions being necessary as a result of the officials' meeting it will not be possible to circulate a full revision of the report but it is hoped to give the Chancellor at least an indication of how the picture has changed).
The forecasts in the report for the year mid-1967 to mid-1968 are of limited validity. As in recent years the section relating to the United Kingdon shows a somewhat more optimistic set of figures than our latest forecasts. Moreover all the figures, those from the overseas sterling area (and the Arab sterling oil producers for which we have to concoct forecasts) as well as for the United Kingdom take virtually no account of the balance of payments consequences of the Middle East situation. Only Malta has commented so far on the possible effects on them of the Middle East crisis.
The report shows an improvement in the Sterling Area's balance of payments position with the rest of the world from a very small deficit in 1965/66 (which was itself a considerable advance from the heavy deficit of well over £600 million in 1964/65), to an estimated surplus of £150 million in 1966/67. It had to be completed before the new United Kingdom figures for the first half of 1967 were available. They reduce this estimate somewhat. As it stands the report shows a substantially higher surplus, put at some £450 million, in 1967/68. It is attributed in large part to the United Kingdom and to non-Commonwealth sterling oil producers. (Notional balance of payments figures for non-Commonwealth oil states have had to be used to complete the aggregate tables). A realistic surplus would be a good deal less: how much less is uncertain. Chancellor will be expected to say something about the outlook for the United Kingdom balance of payments and strength of sterling. Speaking notes are attached.
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SECRET
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