No. 369 NAI TSCH/3/S14106F/1
Memorandum for Government by the Department of External Affairs
'Use of Local Currency Fund'
Dublin, 16 September 1949
- With reference to the request made to the Minister for External Affairs by the Government concerning the user of the Counterpart Fund arising under the ECA Loan for harbour developments, the Minister for External Affairs submits the following considerations:
- The total amount of the funds lodged to the account of the Minister for Finance in the Central Bank from the proceeds of the Counterpart Fund of the ECA loan now amounts approximately to £7,400,000. In addition, a sum of £4,200,000 arising from the same source is due to the Minister for Finance from Grain Importers, Ltd. Accordingly, the total fund arising under the ECA loan in sterling is £11,600,000. The sterling Counterpart Fund of the ECA loan is, of course, constantly growing.
- It will be recalled that, last December, the United States Minister, on enquiring as to the use which would be made of the Counterpart Fund, expressed the hope:-
'that the monies which were now accumulating with the Irish Exchequer as a result of the ECA loan would be used for national development purposes of a productive nature and would not be invested in British or other securities and thus allowed to become unproductive from an Irish viewpoint.'
- In pursuance of the request received from the United States Minister, the Minister for External Affairs submitted a list of projects, after approval by the Government, to the United States authorities, in connection with which it was proposed to utilise ECA funds. The following are the main headings:-
- Land reclamation and drainage;
- Reafforestation;
- Electricity development;
- Development of fishing industry;
- Agricultural training and education;
- Fertilisers;
- Harbours.
It was explained in the Memorandum that the extent to which these funds could be utilised would be conditioned by whether the ECA funds were made available by way of loan or grant.1
- Subsequently, in the Progress Report for the period 3rd April to 31st December, 1948, made to the ECA authorities in pursuance of the Economic Co-operation Agreement which was transmitted to the ECA authorities on the 5th April, 1949, the proposed use of the Counterpart Fund arising out of the ECA loan was re-stated. (See part 5 of this Progress Report which was published as a White Paper).2 Some additional projects for which these funds would be utilised were stated in the Report. These are:-
- The provision of credits and technical advice for planned industrial development;
- The rehabilitation of farm buildings and equipment;
- The provision of credits for housing and health services.
- Quite apart from the fact that specific notice was given to the ECA authorities in relation to the users of this Counterpart Fund for the projects enumerated above, it would be open to the Government to use this Fund as it desires.
- The Minister for External Affairs has already submitted to the Government considerations which, in his view, render the holding of vast Government funds in British securities unwise.3 In addition to these considerations, the attention of the Government is drawn to the following passage from the official communiqué issued in Washington on the 12th September, following upon the discussions between the United States, Britain and Canada in reference to sterling holdings:-
'In principle, the whole of these balances represents a charge on United Kingdom production of goods and services. In practice, however, a substantial proportion will continue to be held as reserves by the countries concerned. To the extent that the balances are liquidated, some proportion of United Kingdom production of goods and services is used to discharge this liability instead of to pay for current imports of goods and services.
This whole problem in its various aspects, including the necessity for providing capital goods for development, was discussed in a preliminary way on a basis of prior technical examination by experts of the three Governments. It was agreed that this was one of the subjects which concerned other countries, and would require further study.'
- The foregoing quotation bears out reports that have been current that some effort might be made to scale down or freeze sterling balances held by Ireland and Commonwealth countries in London. The mere fact that this question was discussed, even though no decision was taken, provides a further reason as to why we should not increase our sterling holdings.
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