VIII.—Currency.

The coinage in circulation in Tonga embraces the currency of England, France, Chili, and the United States of America. The legal tender value of the Chilian money, which bulks most largely, has been fixed by the Government at 4s. per dollar, but its actual value does not exceed 3s. 2d. per dollar. There was formerly a Government Bank of Tonga, but "for certain reasons "not disclosed it was shut up. It is not improbable that the Premier may repeat the experiment on an improved basis, or he might give assistance to the introduction of a branch of a New Zealand bank. In the absence of a bank, and in the present state of the currency, merchants often experience difficulty in arranging exchange. Though English money is at a premium of 5 per cent, the quantity of it in circulation does not appreciably increase, as the Germans, from interested motives, combine to keep the Chilian money in circulation. In 1883 they imported,£14,000 worth of this base coin, page 19 while English merchants sent away £10,000 worth of it to be exchanged or melted down at a loss of 10d. per dollar. The German merchants occasionally sell drafts to the English traders, at a discount ranging from 5 to 15 per cent, payable in London ninety days after sight; and even on these exorbitant terms drafts are not always procurable. Those merchants who cannot export copra to balance their exchanges are therefore placed at an immense disadvantage. On the other hand, Mr. Treskow, the manager of the leading German Company, informed me that he could pay for New Zealand goods by bills on London or Sydney, at a discount of from 1¼ to 1½ per cent. Though I cannot pretend to understand all the bearings of the currency question, I can see that it constitutes a real and formidable difficulty to the extension of trading relations. The Government accounts, I may say, are kept on a "composite" system, the value being represented in dollars, shillings and pence.