890F.515/11: Telegram

The Minister in Egypt (Kirk) to the Secretary of State

861. Following telegram has been repeated to Jidda.

Jidda 34, April 24, Department’s instruction 369, March 6.67 British officials here and in Jidda now question the suggested plan for the issuance of Saudi paper currency on the ground that many Arabs, particularly those living in the interior of Arabia, might refuse to accept it.

A suggestion has been made that more silver rials be placed in circulation to relieve the acute shortage of currency in Saudi Arabia. The suggestion includes a provision for varying if need be the hitherto uniform but often inoperative exchange rate of one rial equals one rupee in order to prevent flight of silver from the country. In informal discussions Saudi officials have reacted favorably largely because (1) the general acceptance of paper notes is doubtful (2) the sovereign has risen to the inconvenient value of 24 dollars in Jidda and so is too large for many transactions and (3) despite the meteoric use [rise?] in the value of the sovereign, the rial has risen faster, and continued imports of gold would tend to make silver appreciate still further.

In exploring the possibility of further coinage of silver, it has been learned that the British Treasury probably will not be able to supply the requisite quantity of silver nor will current demands permit utilization of British Mint facilities.

To assist in further exploration of this or other plans to relieve Saudi currency ills, and, of course without the assumption of any obligation, it would be appreciated if the Department could advise whether or not existing legislation permits the U.S. Government to release silver for export.

If silver could be supplied to Saudi Arabia under Lease-Lend arrangements or on other terms, it would be useful if U.S. mints have capacity available to produce 15 million rials in the latter half of 1943 from dies which could be flown from India.

  1. Instruction No. 369 not printed.