Page 25 - Historical Summaries (Persian Gulf - Vol II) 1907-1953

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Gulf were only willing to accept Pakistani currency at a small discount to cover
repatriation charges as they regarded the Indian rupee as having become established
by usage as the official currency**0) and a recommendation made by the Political
Resident that all His Majesty’s Government’s offices, including the Post Offices,
should deal only in the Indian rupee was accepted.(n) The Rulers and their people
raised no objection to this arrangement. After this the Pakistani Post Office in
Gwadur was the only place in the Gulf where payment in Pakistani as against
Indian rupees was insisted on. The Pakistani Government protested at what they
described as the alleged banning of their currency in Bahrain**2) and it was
explained to them that there was no discrimination against their rupee but that it
was impossible for His Majesty’s Government’s offices to keep their accounts in two
separate currencies. This did not satisfy them and in August 1949 they sent an
official of their State Bank to Bahrain to examine the position. He proposed to
arrange for the Pakistan Government to meet part or all the repatriation charges of
their currency provided it was treated on a par with the Indian rupee,**1) but the
refusal of the Pakistan Government to devalue their rupee at the same time as
sterling and the Indian rupee immediately after his visit made any arrangement
of this kind impossible.
37. In 1949 a Treasury representative visited the Persian Gulf and
recommended that no attempt should be made to persuade the Rulers to enact
legislation making the Indian rupee the official currency but that a separate currency
should be introduced in the Gulf.*11) The latter proposal was not accepted for the
time being by His Majesty’s Government as negotiations were at the time
in progress with the Government of India for the replacement of the Indian
rupee by the East African shilling in Aden and it was feared that these would be
jeopardised by a proposal that the Indian rupee should also be replaced in the Gulf.
The Political Resident pressed the matter further but was informed that the
outcome of the negotiations regarding Aden must be awaited and that meanwhile
the matter should not be raised with the Rulers or anyone else.*85)
38. A new currency was introduced in Aden in October 1951 and the Political
Resident again pressed for the introduction of a new Gulf currency. His Majesty’s
Government decided that the time was inopportune for a change owing to the
weakness of sterling.*88) Sir Roger Makins, after visiting the Persian Gulf in the
spring of 1952, reported that with the arrangements that had been or were being
made for oil revenues to be paid in sterling the currency question was becoming
of smaller importance and that there appeared to be no demand in the States for
any change.*87) At the beginning of 1953 the Political Resident suggested that the
currency question should be taken up again if the Reserve Bank of India continued
to make difficulties about the repatriation of rupee notes from the Gulf States,*88)
a step which they took in an endeavour to stop the smuggling of gold into India
(chapter 3, paragraph 159). A Bank of England representative who visited Kuwait in
February found himself compelled to discuss the currency question with officials of
the Kuwait Finance Department and others and reported strongly in favour of a
new currency.*83) The Ruler of Kuwait consulted the local business community on
the subject and subsequently informed his officials that he had found opinion so
divided that he felt he could not even ask Her Majesty’s Government for advice
about it.*80) Much discussion and correspondence followed and at a departmental
conference which took place in London in August 1953 it was generally agreed
that:—
(a) if practicable, a new currency should be a Persian Gulf currency rather
than, say, a Kuwait currency;
(b) such a currency could only be introduced by Her Majesty’s Government
who would require to take the initiative;

(••) Tel. from P.R. to F.O. 108 of June 21. 1948 (E 8546/115/91 of 1948).
(•') Tel. from F.O. to P.R. 163 of August 7. 1948 (E 9984/115/91 of 1948).
(") Tel. from P.R. to F.O. 207 of October 8.1948 (E 13500/115/91 of 1948).
(,3) P.R. to F.O. Despatch 67 of September 2. 1949 (E 10953/115/91 of 1949).
(“) B.M.E.O. to F.O. 61/39/264 of June 23. 1949 (E 8269/1116/91 of 1949).
(*SJ F.O. to P.R. EA 1115/23 of December 18, 1950.
(“) (EA 1116/6 of 1953).
(,T) Para. 40 at p. 14. Sir R. Makins’ Report.
(••) P.R. to F.O. 111. 18/1/53 of January 2. 1953 (EA 1114/2 of 1953).
(••) Treasury to F.O. U.n. of March 11. 1953 (EA 1116/9 of 1953).
(,c) Tel. from Kuwait to P.R. 23, Saving, of March 19, 1953 (EA 1116/11 of 1953).