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-•HOLD FOR RELJ&SE AT j3.:3Q .P.M. , ,E,S.T. , FINANCIAL AGREEMENT BETWEEN THE GOVERNMENTS OF THE UNITED AND THE UNITED KINGDOM It is hereby agreed between the Government of the United States of America and the Government of the United Kingdom, of Great Britain and Northern Ireland as follows: 1. Effective-date, of the Agreement. The effective date of this Agreement shall be the date on which the Government of the United States notifies the Government of the United Kingdom that the Congress of the United States has made available the funds necessary to extend to the Government of the United Kingdom the line of credit in accordance with the provisions of this Agreement. 2. Line of credit. The Government of the' United States will extend to the Government of the United Kingdom a line of credit of $3,750,000,000 which may be drawn upon at any time between the effective date of this Agreement and December 31, 1951, inclusive. 3. Purpose of the line of credit. The purpose of the line of credit is to facilitate purchases by the'United Kingdom of goods and services In the United States, to assist the United Kingdom to meet transitional post-war deficits in its current balance of payments, to help the United Kingdom to maintain adequate reserves of geld and dollars, and to assist the Government of the United Kingdom to assume the obligations of multilateral trade, as defined in this and other agreements. 4. Amortization and interest. (i) The amount of the line of credit drawn by December 31, 1951, shall be repaid in 50 annual installments beginning on December 31, 1951, with interest at the rate of 2 per cent per annum. Interest for the year 1951 shall be computed on the amount outstanding on December 31, 1951, and for each year thereafter, interest shall be computed on the amount outstanding on January 1 of each such year. Forty-nine annual installments of principal repayments and interest shall be equal, calculated at the rate of #31,823,000 for each 81,000,000,000 of the line of credit drawn by December 31, 1951, and the fiftieth annual installment shall be at the rate of $31,840,736.65 for each such $1,000,000,OpO. Each installment shall consist of the full amount of theinterest due and the remainder of the installment shall be the principal to be repaid in that year. Payments required by this section are subject to the provisions of section 5« (ii) The Government of the United Kingdom may accelerate repayment of the amount drawn under this lineof credit. .^+ Waiver of interest payments. In any year in which the C-overnment of the United Kingdom requests the Government of the United States to waive the amount of the interest due in the installment of that year, the Government of the United will grant the v/aiver If; .. (a) the -2(a) the Government of the United Kingdom finds that a waiver is necessary in view of the present and prospective conditions of international exchange and the level of its gold and foreign exchange reserves and (b) the International Monetary Fund certifies that the income of the United Kingdom from home-produced exports plus its net income from invisible current transactions in its balance of payments was on the average over the five preceding calendar years less than the average annual amount of United Kingdom imports during 1936-8, fixed at L886 million, as such figure may be adjusted for changes in the price level of these imports. Any amount in excess of £43,750,000 released or paid in any year on account of sterling balances accumulated to the credit of overseas governments, monetary authorities and banks before the effective date of this Agreement shall be regarded as a capital transaction and therefore shall not be included in the above calculation of the net income from invisible current transactions for that yepr. If waiver is requested for an interest payment prior to that due in 1955, the average income shall be computed for the calendar years from 1950 through the year preceding that in which the request is made. 8. Relation of this line of credit to other obligations. (i) It is understood that any amounts required to discharge obligations of the United Kingdom to third countries outstanding on the effective date of this Agreement will be found from resources other than this line of credit. (li) The Government of the United Kingdom will not arrange any long-term loans from governments within the British Commonwealth after December 6, 1945, and before the end of 1951 on terms more favorable to the lender than the terms of this line of credit. (iii) Waiver of interest will not be rcqudfftcdor allowed under section 5 in any year unless the aggregate of the releases or payments in that year of sterling balances accumulated to the credit of overseas governments, monetary authorities and banks (except in the case of colonial dependencies) before the effective date of this Agreement is reduced proportionately, and unless interest payments due in that year on loans referred to in (ii) above are waived. The proportionate reduction of the releases or payments of sterling balances shall be calculated in relation to the aggregate released and paid in the most recent year in which waiver of interest was not requested, (iv) The application of the principles set forth in this section shall be the subject of full consultation between the two governments as occasion may arise. 7, Sterling area exchange arrangements. The Government of the United Kingdom will complete arrangements as early as practicable and in any case not later than one year after the effective date of this Agreement, unless in exceptional cases a later date is agreed upon after consultation, under which immediately after the completion of such arrangements the sterling receipts from current transactions of all sterling area countries (apart from any receipts THURSDAY. DECEMBER 6, 1945 -3receipts arising out of military expenditure by the Government of the United Kingdom prior to December 31, 1948, to the extent to which they are treated by agreement with the countries concerned on the same basis as the balances accumulated during the war) will be freely available for current transactions in any currency area without discrimination; with the result that any discrimination arising from the so-called sterling area dollar pool will be entirely removed and that each member of the sterling .«*rea will have its current sterling and dollar receipts at its' free disposition for current transactions anywhere. 8. Other exchange arrangements. (i) The Government of the United Kingdom agrees that after the effective date of this Agreement it will not apply exchange controls in such a manner 98 to restrict (a) payments or transfers In respect of products of the United States permitted to be Imported into the United Kingdom or other current transactions between the two countries or (b) the use of sterling balances to the credit of residents of the United States arising out of current transactions. Nothing in this paragraph (1) shall affect the provisions of Article VII of the Articles of Agreement of the International Monetary Fund when those Articles have coma into force, (ii) The Governments of the United States and the United Kingdom agree that not later than one year after the effective date of this Agreement, unless in exceptional cases a later date is agreed upon after consultation, they will Impose no restrictions on payments and transfers for current transactions. The obligations of this paragraph (il) shall not apply: (a) to balances of third countries and their nationals accumulated before this paragraph (il) becomes effective; or (b) to restrictions Imposed in conformity with the Articles of Agreement of the International Monetary Fund, provided that the Governments of the United Kingdom and the United States will not continue to Invoke the provisions of Article XIV, Section 2 of those Articles after this paragraph (11) becomes effective, unless in exceptional cases after consultation they agree otherwise; or (c) to restrictions imposed in connection with measures designed to uncover and dispose of assets of Germany and Japan. (iil) This section and section 9, which are in anticipation of more comprehensive arrangements by multilateral agreement, shall operate until December 31, 1951. S. Import arrangements. If either the Government of the United States or the Government of the United Kingdom imposes or maintains quantitative import restrictions, such restrictions shall be administered on a basis which does not discriminate against Imports from the other country in respect of any product; provided that this undertaking shall not apply in cases in which (a) its application would have the effect of preventing the country imposing such restrictions from utilizing, for the purchase of needed Imports, inconvertible currencies CONFIDENTIAL—HOLD FOR RELEASE AT 5:30 P.M., E.S.T. , THURSDAY, DECEMBER 6. 1945 4 -4currencies accumulated up to December 31, 1946, or (b) there may be special necessity for the country imposing such restrictions to assist, by measures not Involving a substantial departure from the general rule of non-discrimination, a country whose economy has been disrupted by war, or (c) either government imposes quantitative restrictions having equivalent effect to an exchange restriction which that government is authorized to impose in conformity with Article VII of the Articles of Agreement rf the International Monetary Fund, The provisions of this section shall become effective as soon as practicable but not later than December 31, 1946. 10. Accumulated sterling balances. (i) The Government of the United Kingdom intends to make agreements with the countries concerned, varying according to the circumstances of each case, for an early settlement covering the sterling balances accumulated by sterling area and other countries prior to such settlement (together with any future receipts arising out of military expenditure by the Government of the United Kingdom to the extent to which they are treated on the same basis by agreement with the countries concerned).- The settlements with the sterling area countries will be on the basis of dividing these accumulated balances into three categories (a) balances to be released at once and convertible into any currency for current transactions, (b) balances to be similarly released by installments over a period of years beginning' in 1951, and (c) balances to be adjusted as a contribution to the settlement of war and postwar indebtedness and in recognition of the benefits which the countries concerned might be expected to gain from such a settlement. The Government of the United Kingdom will make every endeavor to secure the early completion of these arrangements. (ii) In consideration of the fact that an important purpose of the present line of credit is to promote the development of multilateral trade and facilitate its early resumption on a non-discriminatory basis, the Government of the United Kingdom agrees that any sterling balances released or otherwise available for current payments will, not later than one year after the effective date of this Agreement unless in special cases a later date is agreed upon after consultation, be freely available for current transactions in any currency area without discrimination. 11, Definitions. For the purposes of this Agreement: (l) The term "current transactions" shall have the meaning prescribed in Article XIX (l) of the Articles of Agreement of the International Monetary Fund. (ii) The term "sterling area" means the United Kingdom and the other territories declared by the Defence (Finance) (Definition of Sterling Area) (No. 2) Order, 1944 r to be included In the sterling area, namely "the following territories excluding Canada and Newfoundland, that is to say — (a) any CONFIDENTIAL—HOLD FOR RELEASE AT 5:50 P.M., E.S.T. , THURSDAY, DECEMBER 6, 194 5 (a) any Dominion, (b) any other part of His Majesty'o dominions, (c) any territory in respect of which a mandate on behalf of the League of Nations has been accepted by His Majesty and is being exercised by His Majesty's Government in the United Kingdom or in any-Dominion, (d any British protectorate or protected State, (e Egypt, the Anglo-Egyptian Sudan and Iraq, Iceland and the Faroe Islands." (f 12. Consultation on Agreement. Either government shall be entitled to approach the other for a reconsideration of any of the provisions of this Agreement, if in its opinion the prevailing conditions of international exchange Justify such reconsideration, with a view to agreeing upon modifications for presentation to their respective legislatures. Signed in duplicate r\t Washington, District of Columbia, this 6th day of December, 1945. For the GOVERNMENT OF THE UNITED STATES OF AMERICA / B / . Fred M. Vlnson Secretary of the Treasury For the GOVERNMENT OF THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND /s/ Halifax His Majesty's Ambassador Extract denary snd Plenipotentiary at Washington
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