Coll 54/2 'Middle East (Official) Committee: Working Party' [‎43r] (85/642)

VV) Kr)
As a result of the Anglo-Frerich-Lebaiiese—Syriati
inancial^agreement of 1944 which fixed the Lebanese—Syrian
pound at d.oh to .£ 1 , the French authorities undertook to
revalue, in the event of a devaluation of the franc in
terms of sterling, the Lebanese and Syrian franc holdings,
when devaluation took place in December, 1945 this
engagement was honoured by the payment by the French
Treasury of 16.6 milliard francs. A year later however the
French Government indicated that in the event of a further
evaluation of the franc they would not be prepared to make
good the depreciation of Lebanese and Syrian holdings.
Appeals by the Lebanese and Syrian Governments to His
Majesty s Government and to the United States Government
produced no results and negotiations were opened with France
The French Government after protracted talks agreed to
revalue (following the revaluation of the franc in January,
194 o;, and to guarantee against further devaluation some
milliard out of the total of approximately 23
milliard francs held by Lebanon and Syria after deducting
° f CGrta J: n ^ r 'unch properties in the Lebanon and
Syria taken over by the local Governments; to release
these holdings at a rate not exceeding one tenth per year
during the five year period beginning January, 1953,
and at the end of that period to make available the balance
any currency desired by the Governments (or if exchange
restrictions existed at the time), half in French francs and
half in European currencies. They however agreed to
release the balance of the 23 milliard francs partly in
r,J^T riC£ v f0r the purchase of French goods and partly (but not
exceeding one half) in Furopoan currencies, i.e. not
including dollars. ’
^ The Lebanese Government signed an agreement on this
basis in January, 1948. The Syrian Government declined and
it was not until the summer of 1949 that a Franco-Syrian
agreement was concluded. Though the signatures of the
Franco-Lebaneso agreement was the subject of groat
controversy in the Lebanon there is little doubt that the
disadvantages of the agreement are more than outweighed by its
advantages. Monetary stability (except in the event of a
devaluation of sterling) is guaranteed for ten years. it
should bo observed however that, before the end )f that
period when the franc cover may bo only half of the valu.
Lebanese and Syrian pounds in circulation, the currency
will probably need to bo reorganised* It is generally
recognised in the Lebanon that it should be brought more
into lino with the currencies of neighbouring countries
than based on sterling. Syria and the Lebanon did not
devalue their currencies following the devaluation of the
pound sterling in September, .1949.
The note circulation of the Lebanon and Syria which in
‘^59 amounted to some £SL 40M increased in 1945 os a result
pf allied military expenditure to about £LS 400M. It fell
in 1947 to £LS 346M and the bank of issue by restricting
credit is now following a policy of disinflation. The
value of bank notes in circulation in the Lebanon fell
iri May to £L164 in August. In 1947,
pounls Lob ^se, (i.o. issued in Beirut),
and W,000,000 were pounds Syrian (issued in Damascus).
This division is however arbitrary - in February, 1948 it
in
of
was