Coll 6/19 'Arabia: (Saudi Arabia) Hejaz-Nejd Annual Report.' [‎223r] (446/540)

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Treasurer-General was created, and was given to one of the A1 Fadhls, a family
discredited by the embroilment of their affairs described in paragraph 215.
134. Except for the temporary occultation of Abdullah Suleiman, the
reforms had produced no palpable result up to the end of the year. The
Government continued to live from hand to mouth, salaries remained in arrear,
and it was generally felt that the remedy had been devised too late, even if
Ibn Saud had men capable of administering it. It detracted from the
attractiveness of the reform that the allocation of 25 per cent, of the revenue to
the payment of old debts in fact implied a drastic moratorium without any
certainty of eventual settlement. It was proposed to treat all creditors on a
footing of equality, and to pay them in instalments as and when resources
permitted, a process which, according to Fuad Bey's forecast, would take about
two years. The hardship on creditors, if this plan should be strictly adhered to,
promised to be all the greater, as it was later announced that the new budget
would run from the ist of Shaban, i.e., the 12th December, 1931. When
explaining the reform to Mr. Hope Gill, on the 13th November, Fuad Bey and
Sheikh Yussuf Yasin conveyed an express request that His Majesty’s
Government should allow the debt to the Government of India to be treated in the
same way as other debts. The position was less clear in regard to certain other
claims in which His Majesty’s Government had an interest. An older promise
to keep telegraphic receipts in a special account to ensure punctual settlement
with the Eastern Telegraph Company was renewed, but the two announcers
confined themselves to taking note of Mr. Hope Gill’s view that the agreement
regarding payment for the stolen benzine belonging to Egyptian Shell should be
strictlv observed. The Government were understood to be negotiating direct
with Messrs. Gellatly, Hankey and Co., for a deferred settlement of other
indebtedness to them. At the end of the year that firm was still working on the
basis of paying half the duty on new imports in cash, and settling the other half
off against monies due to them by the Government.
135. Another project formed in the latter part of the year was that of
engaging an European financial adviser. The post was at one moment offered to
the Jedda manager of the Dutch Bank. This proposal fell through, and at the
end of the year negotiations were pending for the employment of another
Dutchman.
136. Among the expedients resorted to during the year to increase revenue
was a considerable increase in customs duty early in the year, and a further
increase affecting a limited range of important commodities in November. Heavy
calls in the nature of forced loans in money or kind were made in the towns.
Certain tribes were also tapped. A levy of 10 riyals a head for alleged war
purposes was said to have produced 400,000 riyals in the Taif region alone.
137. The financial decline in 1931 was accompanied by a series of exchange
crises. Under regulations promulgated on the 3rd January, 1928, the monetary
system of the country is based on the English gold pound, a coin of which there
has normally been a plentiful supply. The new Saudi riyal, a silver coin similar
in weight and content to the old Turkish mejidie, was given a fixed value at the
parity of 10 to the £ gold. It was of unlimited legal tender, but the parity was
safeguarded in principle by a stipulation that the Finance Department would
at any time exchange gold for silver or vice versa at the legal rate. The pound
and the riyal were respectively sub-divided into 110 and 11 piastres miri, a
theoretical unit used in accountancy, but not represented by any actual coin;
and for practical purposes into nickel “ Saudi ” piastres and smaller fractions,
with an exchange value of 220 Saudi piastres to the pound. The name halala,
which applies properly to the quarter piastre Saudi, is also used more generally to
describe the nickel coinage as a whole.
138. In February, owing to unsettled political and economic conditions, the
riyal broke away from gold sufficiently to alarm the market and the Government.
The latter attempted to restore the situation. They reasserted by proclamation
the legal parity. They made an arrangement with the Dutch Bank to accept
riyals^at 10, plus a very small surcharge and the bank’s commission, in payment
for foreign exchange. They prohibited the export of gold, These measures were
temporarily successful, but broke down some weeks later. The riyal again