Tangled Exchange.

Tonga Tackles Complicated Posi tion by Charging 15% for Transfers to N.Z.

THE Tongan Government, faced with an extraordinarily difficult and complex exchange position, has just raised the charge for Post Office orders, issued on New Zealand, to 3/- per £1.

That is to say, one must pay 23/- in Tonga for £1 in New Zealand; and one may not transfer more than £10 per month by this means.

Tonga has been using three curren cies—British silver (the same as New Zealand and Fiji), Australian silver (which has been ranking at par with British silver) and Tongan Treasury notes. There was no restriction on the circulation of the debased Australian coinage. One of our largest copra buyers recently brought in £6,000 worth of Australian coins, which have ranked equally with the British.

Most of the Kingdom’s goods are bought in New Zealand, and paid for by drafts through the Tongan Post Office.

To meet these drafts in N.Z. the Ton gan Government arranged a bank over draft in Auckland, for which it pays six per cent. It has £30,000 invested in N.Z.

The attempt to sell large quantities of Tongan bananas in New Zealand has failed, and, lacking other means of building up a credit there, and finding its bank overdraft steadily mounting, the Tongan Government was seriously embarrassed. It therefore has taken the steps described to reduce the transfer of money from Tonga to New Zealand.

The main trouble is the Australian silver in the Kingdom. The Tongan Treasury has issued notes nominally worth £1, supposedly backed by coin and a foreign investments. But the coin, when paid out by the Treasury in exchange for its note, usually proves to be 20 Australian shillings, which are worth only 16½ shillings in New Zea land, and 14 shillings in Britain. The triple currency worked well enough for purposes of internal trade; but the Tongan P.O. (the only banking system operating there) began to experience nightmares when, owing to the coun try’s decreased exports, New Zealand credits ran out and it started to use the currency (including a large proportion of Australian) for purposes of inter national exchange.

By far the biggest item of export, copra, is being bought largely by Aus tralian interests, and payment natur ally is being made in Australian money.

The Government has been lax in not drawing a clear distinction between Australian and British currency; so that, when the Tongans tried to make purchases in New Zealand with money earned in Australia, trouble inevitably arose.

The remedy, obviously, will be found by Tonga using Australian money to purchase Australian goods. The Nuku alofa merchant, loaded with Australian money, has been turned away from New Zealand, where Australian money is at a discount of 16 per cent. Inevit ably, he will buy from Australia, where he will get 20/- worth of goods for 20 Australian shillings.