Coll 6/8(1) 'Printed Series: 1929 to 1938.' [‎287r] (578/1062)

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The'currericy ofgold poundT^ 11 ^ df f , f cia,ed “ the market.
e and thereof
The currency
and the nickel piastre and its fraction oTrAr 1 ' ? ? y 'it and l ' , ' actio,ls tllC1
known as halala. I should, exnla a ll? f -_ whl ? h ’. thR piastre,
known as halala. I should exulaTn W1U ? n, i • t ' Jie f l uarte " piastre, is
the Hejaz proper aud that th° circulation nf u ° ti! 1S curr ® nc y is general in
ble, although they remain, I uuderstaad the^^ do,lars is
Ibn Sand’s dominions, including Asir. ’ ^ mcipai currency elsewhere i n
down to S l“orIven S lower ifa Panfek^marktrLv™ TllT^ 8 " ^ ^
Government, who at times are latRe hold-rs of cold a one arm! "f 8 h 0 '*' ^ he
short of it. The local market was depressed owin^tr’ a p ear f d ^ ran »'»g
the nrosneet of - m^et, uL • i. i ®, . S to § eneral c0, ' dlt loM and
the prospect ot a much diminished pilgrimage. Customs dues were raised
o?u S i\!r' ,r i’* 7 la St T a r e a ' 1:it e ' s > as reported in my despatch No. 0 T 9 of the
8th March to the Department of Overseas T,ade. F • . » oi the
4. All these causes doubtless contributed to the slump in rivals
although I have not sufficient expert knowledge to iudee of the effect of
particular factors nor do I know what quantity of riyats is required for the
normal business of the country. The Government were forced to take the
situation in hand, and an attempt was made to restore the riyal by a pro-
clamation, which in Jedda w<;S disseminated late one evening by that pictu
resque survival, the town crier. The Government action produced its effect'
but it was said that the riyal still passed surreptitiously at a depreciated
price. When the King came to Jedda on the 25th February, conferences
were held between the authorities, bankers and merchan s. It was decided
to enforce the law stringently and to bolster vp the riyal by prohibiting
the exportation of gold. The Government expressed readiness themselves
to accept riyals for all purposes at 10 to the £ sterling, and enjoined
this on everyone else. They secured the support of the Nederlarniische
Handel Maatschappij (Netherlands Trading Society), which undertook to
take riyals at the official rate, plus a small supplement in payment for
drafts. The only other banking firm in Jedda, Messrs. Gellatly, Hankey and
Co. (Sudan) (Limited), took up a more conservative attitude and declined to
commit themselves, although they are in fact dealing at the official rate up
to a limit.
5. I enclose a translation of a communique issued in the “ Umm-al-
Qura ” of the 6th March ( 1 ). The same number of the paper had a leading
article attributing the crisis to the fraudulent manoeuvres of speculators,
denying that there has been any real crisis at all and describing the action of
the Government.
6. The measures taken have produced stability for the time being, the
riyal being pegged at 10 to export-prohibited gold. The effect has been not
to rehabilitate the riyal so much as to bring gold down to its level. In view
of the poor pilgrimage prospects, it is difficult to see what the outcome will
be in a country with no export trade and little capacity in the highest places
for any form of earning other than that of postponing, where possible, the
payment o* debts. It is to be supposed that the level of prices will rise.
The action of the Dutch Bank has been of material assistance to the Govern
ment, but it is not clear on what basis that action rests. When he embarked
on it, the manager, Mr. Jacobs, appeared to be confident and to think that
the Hejaz was good for any amount up to the total value of riyals in circu
lation. He professed to rely o.i the honour of the Government and thus
found common ground with Mr. Philby, who in ' ne conversation suggested
that anyone who did not share this simple faith might as well give up trying
to do business here.
7. Mr. Jacobs seems to be a pretty astute financier and had no doubt
some more solid basis to work on. On the face of it hr, bank make six
balalas per £ or about par on every draft they sell, and they a so
charge a commission of 1 per cent. As they are in effec en pig go
equivalent abroad on the security of riyals, the value to them of the w
profits would appear to depend not only o n the eventual solvency of the
( 1 ) Notpiinted.