asked the Minister for Finance if he is now in a position to state how it is proposed to provide for the increased repayment liability on loans received under the Marshall Aid programme prior to devaluation, and if he will further state what safeguards are being taken to ensure that repayment, and/or interest on these and subsequent loans, will not bear heavily on our community in the event of a further devaluation.
Ceisteanna—Questions. Oral Answers. - Repayment of Marshall Aid Loans.
Dollar borrowings from the Government of the United States under the European Recovery Programme are, in accordance with the loan agreements, repayable in dollars with interest at 2½ per cent. per annum. Payment of interest is due to commence in December, 1952. Repayment of principal will extend over the period from June, 1956, to December, 1983. Article 4 of the basic agreement, dated October 28, 1948, provides for the modification of the repayment terms in certain circumstances.
The Irish currency equivalent of these dollar borrowings is lodged to the credit of an account of the Minister for Finance with the Central Bank, from which transfers are made from time to time to the American Loan Counterpart Fund. This fund is intended to serve as an Irish currency reserve to be used in due course for the purchase of dollars to discharge the half-yearly payments of interest and principal to the United States Government. In accordance with the Central Fund Act, 1949, the fund may be invested in Government securities. This provision secures a remunerative use for the reserve held by the fund against the principal liability in respect of dollar borrowings, and enables interest to be earned to meet dollar interest payments as they fall due.
Having regard to the provisions of Article 4 of the basic loan agreement and to the changes in circumstances which might occur in the course of the next 33 years, it is too soon to express any definite view as to how far, if at all, the devaluation of sterling last September may in the end result in the Irish currency reserves against dollar obligations being insufficient. If any deficiency were ultimately to emerge it would, of course, have to be made good from public funds, but the making of provision against such a deficiency is not considered necessary at present.
Is there any technical understanding that the countries who have used Marshall Aid will not be asked to repay it until their currencies are back on a par with the dollar?
There is no such arrangement, but the object of Marshall Aid is to secure convertibility.