Britain makes final World War II debt payments

Thursday, January 4, 2007

Great Britain has paid off the last of the loans it received to rebuild the country after World War II, sixty years ago. The last payment of US$83.25 million was transferred electronically to the United States on the last business day of 2006, along with an additional US$22.7 million to clear a similar debt owed to Canada.

The original loan of US$4.34 billion, equivalent to about $27 billion in today's dollars, was negotiated in 1945 by John Maynard Keynes to protect the country from bankruptcy. Canada contributed US$1.2 billion, or an equivalent of about $7.5 billion today.

The loan was required after the U.S. terminated grants in aid to Britain under the Lend Lease Act, signed by then-President Franklin D. Roosevelt in 1941. On 2nd September 1945, with the decision to terminate aid, some of the goods were still in transit and it was necessary for Britain to arrange new loans to finance reconstruction.

The loan was negotiated at a 2% interest rate, payable over 50 years starting in 1950. The final payment was actually six years late, the British Government having suspended payments due in the years 1956, 1957, 1964, 1965, 1968 and 1976 because of financial difficulties at those times.