§ Mr. Austin Mitchell
asked the Chancellor of the Exchequer what was the estimated effect on the reserves and on sterling lending to overseas residents each quarter of the change in financing export credits; and to what extent the change reduced the borrowing requirement in each period.
§ Mr. Parkinson
I have been asked to reply since the Export Credits Guarantee Department falls within my responsibilities.
I assume that the hon. Member is referring to the announcement of 15 December 1976—Hansard, c. 1530—that in future the emphasis in financing export credits at fixed rates of interest would be towards foreign currency. Since the beginning of the financial year 1977–78 when this policy came into effect until September 1979 £2,579 million (at current exchange rates) of foreign currency fixed rate export credit loans had been underwritten by ECGD, the bulk of it in United States dollars.
The quarterly breakdown of foreign currency business underwritten for the last two years is given below. Values are shown as the sterling equivalent as at 4 February 1980:604W
Business Underwritten £million 1977–78 369 1978–79—First quarter 404 Second quarter 250 Third quarter 628 Fourth quarter 50 1979–80—First quarter 263 Second quarter 615 Total 2,579 Not all these facilities have yet been fully drawn down.
It is not possible to quantify the effect of this foreign currency lending on the reserves or with any precision on the PSBR. However, had all this fixed rate export credit been financed in sterling this would both have involved sterling lending to overseas residents and would have increased ECGD's liability to provide the banks with refinancing by over £800 million, thereby increasing the PSBR.