asked the Minister for Finance if any provision whatever is contained in the Marshall Aid Loan contract in the event of another devaluation of the pound; and, if not, whether he will state what the position will be in such an event.
Ceisteanna—Questions. Oral Answers. - Marshall Aid Loan and Devaluation.
There is no specific provision in the Marshall Aid Loan Agreements to cover the eventuality of another devaluation of the Irish pound the effect of which would, of course, be to increase the interest and repayment charges in Irish currency in respect of the dollar borrowings. The only relieving section in the agreements reads as follows:—
"If at any time or from time to time the parties hereto determine that it would be in their common interests because of adverse economic conditions or for any other reasons to pospone, or provide for the postponement of, any instalments of interest or principal, or to alter or provide for the alteration of any provisions of the aforesaid promissory note relating to payment of interest and principal, or to modify the aforesaid promissory note in any other respect, they may by mutual agreement in writing provide for any such postponement or alteration or other modification."
asked the Minister for Finance if he will state (a) the actual loss to the State in extra sterling liability on foot of the American loan as a result of devaluation, and (b) the estimated loss by way of interest charges arising from the same cause; and, further, calculating the amount of sterling to be paid in relation to the dollars borrowed, the actual rate of interest to be paid thereon.
The extra liability on foot of the American loan as a result of the devaluation of September, 1949, is £5,085,058.
The interest payments on the American loan will total $72.46 million. Converted at the current rate of exchange with the United States dollar ($2.80 to the £), this amounts to £25.88 million. If the pre-devaluation rate of exchange, namely, $4.02 to the £, were still operative, the total interest charge would be £18.03 million. The extra interest payable as a result of devaluation is, therefore, £7.85 million.
The rate of 2½ per cent. per annum at which interest is payable in dollars on the dollar total of the loan is equivalent to a rate of £2.16, 3 per cent. on the proceeds of the loan, namely, £40.7 million. The explanation for the higher rate of interest as applied to the proceeds of the loan is that the interest charge of 2½ per cent. attaches to the liability for principal which at the current rate of exchange is £45.8 million.
Is the Minister aware that at the time that this Marshall Aid was being negotiated, I raised in this House by way of question the subject matter of this particular question, that is to say, whether provision was being made for the repayment? Is he aware that the answer I got at the time was to the effect that as repayment was so far away it was not necessary to deal with it? Is he now satisfied that proper steps were not taken at the time?
I am afraid I should have to ask for notice of that question.
Question No. 10.
(Interruptions.)
There seems to have been a lot of slipshod negotiations in connection with that loan.
Surely the Minister is not entitled to make allegations of that kind without producing evidence to support them?
I am quite entitled to my opinion and I repeat it. There is much more evidence to substantiate that opinion than there was to support the allegations which the Deputy made on the eve of the general election in 1948.
£10,000,000 thrown away.
(Interruptions.)
Question No. 10.