Ext 5001/41 'PERSIA – INTERNAL (Miscellaneous despatches).' [‎54r] (107/248)

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71. The note circulation is still on the increase; it was 5,701 million rials
in February, 6,056 in March, 6,119 in April, 6,222 in May and 6.261 million
in June.
72. The Persian Government was represented by a small delegation headed
by M. Ibtehaj, the Governor of the National Bank, at the Middle East Financial
Conference held in Cairo during April, and it was a party to all the resolutions
^ passed. Some of them would admittedly be difficult to apply in Persia; but it
is certain that Dr. Millspaugh, who already knows well the measures required
to restore the Persian economy, will continue to press the Government to adopt
those measures as and when possible. In this pressure he is assisted by His
Majesty’s Embassy. He is in particular considering additional direct taxation,
partly because owing to governmental delays the increased rates of income tax
will not for the present produce the full revenue required.
73. The Millspaugh Mission is also undertaking a survey of post-war
problems—among them budgetary, fiscal and banking matters; trade and tariff
policy; agriculture and industry; public works and unemployment; and general
economic planning. This survey is being carried out by a number of committees •
each made up of Persian officials and members of the mission together with
Persian merchants and others of standing in cases in which they will be of
assistance.
74. Sales of gold on His Majesty’s Government’s account have continued
during the last three months, although it is impossible to provide any exact figure
to show their effect in combating inflation. Their proceeds were equivalent to
£321,400 in March, £334,800 in April, £442.400 in May and £478,000 in June.
It is to be hoped that they may be further increased partly as a result of the
curtailment of sales in other Middle Eastern countries. As is known, the rial
proceeds of these sales are at present being transferred to the United States
Government.
75. The financial agreements with the Persian Government covering the use
of the railway system since the 1st September, 1941, by the Allied nations has not
yet been signed. Some points raised on it by the Government of the Union of
Soviet Socialist Republics have, it is believed, been settled; but approval of
certain of the clauses in the agreement is at present being withheld by the United
States Government who, it appears, may be unwilling to share financial responsi
bility for the railway with the two other Governments, except in so far as they
operate the system south of Tehran as agents of His Majesty’s Government.
Meanwhile, it has not been possible to place the draft agreement before the
Persian Government, who have for some time been pressing for a settlement.
76. The purchase of 600 tons of silver by the Government of India from
the National Bank of Persia is under negotiation. This is in addition to the
500 tons so purchased a few months ago, the cost of which to India was increased
by the necessity for paying Persian taxation before the silver could be exported.
It is hoped to arrange that no taxation will be charged in respect of the
second sale.
77. The expenditure on Polish refugees in Persia is decreasing
substantially, mainly owing to the reduction in numbers. There has undoubtedly
been extravagance on this service in the past, but steps are now being taken by
His Majesty’s Embassy to impose a tighter control by requiring from the local
Polish delegation explanations on doubtful items of expenditure.
Economics.
78. Notwithstanding the Persian criticisms of Dr. Millspaugh, the period
under review had shown a steady reinforcement of the personnel and organisa
tion of his mission. Dr. H. G. Black, a prominent former member of the United
States Administration, came from Washington to become Chief Administrator of
the Cereals and Bread Section : and a number of other Americans arrived to take
over posts in Tehran and the provinces—notably in Meshed and Tabriz in the
northern zones. There was thus a good chance that the work of introducing order
into Persian economic affairs would now be extended progressively to the northern
zones, which have hitherto been practically inaccessible to the mission, owing to
Russian obstruction. Labour troubles increased, especially in Isfahan, where
riots occurred among employees in the textile mills, in which workers were
injured and output was considerably reduced. The Government continued to
hold adequate stocks of the monopolised goods on which the civil population
depends for its existence; but distribution was bad and large sections of the
population received inadequate and in some districts no rations. Distribution,
in fact, remained the weakest feature of the economic system.