Coll 28/67 ‘Persia. Annual Reports, 1932–’ [‎288r] (575/644)

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showed a deficit of about 1,400 million rials, and the Extraordinary Budget
(covering the industrial and trading operations of the Government), which was
self-balancing. Although Dr. Millspaugh had indicated that the only way he
could see of balancing the Ordinary Budget was by borrowing from the Allies,
the Deputies, in their patriotic zeal, preferred to produce a balanced budget
by including as an item of revenue the value of stocks of commodities held by
^^iie various Government trading organisations at the beginning of the financial
year, rather than consent to a foreign loan.
(g) Sale of Gold.
94. By no means the least important weapon employed in the fight against
inflation in Persia was the sale by His Majesty’s Government of gold in the
open market, in order to withdraw the excess purchasing power from the people
to some extent. In the initial stages of the scheme, which was begun in
June 1943, the proceeds of the sales of gold were allocated to the British military
authorities in Persia, to defray in part their local expenditure, but later, when
the United States authorities also began to interest themselves in what seemed
a profitable plan for financing the cost of the war, an arrangement was concluded
between London and Washington whereby the whole of the local currency proceeds
derived from sales in Persia were placed at the disposal of the American
authorities with effect from 25th September, 1943.
(h) Note Circulation.
95. In January 1943, the value of notes in circulation was
Rials 3,193-24 millions compared with 935-93 millions on the outbreak of war.
By December 1943, notes in circulation had risen to 6,150-75 millions, an increase
during the year of 2,957-51, or almost 100 per cent.
96. The supply of currency notes during the year occasionally gave cause
for anxiety, but there were no acute shortages such as were experienced in 1942.
At one stage early in the year, however, the currency authorities threatened to
issue no more notes against sterling until we delivered the gold due to Persia
under the Financial Agreement. The position we had adopted was that we would
hand over the gold when the Majlis ratified the agreement. As it happened, the
threat was never carried into effect, and the agreement was ratified in June.
(i) Sale of Silver to India.
97. When the National Bank of Iran decided, as a matter of policy, to
replace the silver in the Currency Reserve by gold which the Government was
purchasing from the United States authorities, the Government of India were
asked if they wished to buy a quantity of 500 tons which was available for sale
in the open market. Of this amount the bank ofiered to sell 120 tons at
Rupees Indian silver coin also widely used in the Persian Gulf. 80 per 100 tolas 916 fine—the approximate price at which the Government
of India had sold a similar amount to the Persian Government in 1942—and the
remainder at the current Tehran price. The offer was accepted, and at the end
of the year arrangements were being made to pack and ship the silver to India.
Altogether the quantity of silver in the Currency Reserve amounted to 1,600 tons
and & the National Bank hope to be able to sell the whole amount to the
Government of India. If this can be done, the Persian Government will not only
stand to make a substantial profit (the silver stands in the Currency Reserve at
the international market price), but under the Financial Agreement the rupees Indian silver coin also widely used in the Persian Gulf.
paid by the Government of India will qualify for convertibility as to 60 per cent,
into gold. On the other hand, the Government of India are buying the silver at
a price well below that ruling in Bombay.
Civil Supplies and Transport.
98. The new import licensing system introduced in the latter part of 1942
at the request of the Middle East Supply Centre to restrict imports to essential
commodities was functioning by the beginning of the year. Of the total import
quota for the period January-June of 71,000 tons, licences were issued for
59,000 tons, the difference being due to a reduction in the originally planned
imports of sugar owing to the discovery of adequate stocks in the country.
Persia’s need for imported goods was considered with sympathy at the Imports
I Conference held in May by the Middle East Supply Centre in Cairo, when more
motor vehicles, heavy chemicals and cotton piece-goods than originally planned
were allocated. In May also agreement was reached between the British,
Americans and Persians as to the method of satisfying Persian requirements of
drugs, a subject that had given rise to misundertanding between the British and