Office of the Historian

223. Message From the British Chancellor of the Exchequer (Jenkins) to Secretary of the Treasury Fowler1

London, undated.

I have been considering our position as regards reserves and short-term debt. As you know, a difficult position has been aggravated by the events of last month, and we shall have extremely heavy commitments to meet in the next year and more. Meanwhile the balance of payments, despite the severity of our policies, has not been improving as rapidly as we hoped. The new measures I introduced on 22 November2 will, of course, make a considerable contribution, but the deficit for 1968 as a whole will be large. We expect a substantial surplus in the third quarter to be followed by a deficit in the fourth quarter.

In all the circumstances, I think it would be right for us this year once more to exercise our right, under the Agreement of 1957,3 to defer payments of interest and repayments of capital under the post-war loans. As you know, the Agreement gave us the right, when we feel it necessary, in view of the present and prospective conditions of international exchange and the level of our gold and foreign exchange reserves, to defer these payments on seven occasions. So far this has been done three times, in 1957, 1964 and 1965. I feel, and I think you will agree, that the circumstances in which it was envisaged that we should exercise this right certainly exist at present.

The repayments, as you know, fall due at the end of December. I have not overlooked the fact that a deferment this year may add, in some degree, to your own difficulties by enlarging your balance of payments deficit. But I hope this will not cause you undue embarrassment, particularly since it should be possible to explain this part of the deficit as a special factor. The total sum involved, principal and interest together, is, I understand, $138.3 million.

I am sending a similar message to Mr. Benson in Ottawa saying that we would like similarly to defer the amounts due under the parallel Canadian line of credit.4

  1. Source: Johnson Library, Fowler Papers, International Countries: United Kingdom, 1968, Box 40. No classification marking. Attached to the source text is a December 9 letter from E. W. Maude, Economic Minister at the British Embassy in Washington, to Fowler, indicating that Jenkins had asked him to deliver the message to Fowler.↩
  2. Jenkins announced these measures in the House of Commons on November 22.↩
  3. Signed on March 6, 1957; 8 UST 2443.↩
  4. On December 20, 1968, Jenkins announced the deferment of British payments of principal and interest on postwar U.S. and Canadian loans.↩