Sterling balances and claims negotiations: Britain and Israel 1947–52

Abstract

the Mandate and establish an Arab and a Jewish state in Palestine, the British Government faced three financial problems which took nearly four years to solve.1 First, would either or both new states remain in the sterling area; second, what would be done about the Palestine sterling balances; and, finally, what comprehensive financial settlement covering complicated problems of appraising assets and liabilities should be worked for. While the last issue had to wait until clarification of the overall political situation in Palestine, the first questions posed immediate subjects for decision from late 1947. The fundamental features of membership in the sterling area were that the members used sterling as the normal means of external settlements, and that they held the major part of their reserves in sterling. They also looked to the United Kingdom as a major source of external capital and