Canada borrows abroad for one reason: to defend its currency. Any ominous creakings in the Canadian dollar's exchange rate have been silenced traditionally by a combination of private placements and public issues. The most famous private placement is due for repayment this month. Five years ago, the government of Canada borrowed $300 million front the Saudi Arabian Monetary Agency at a coupon of 16 1/4 % .
Last month the Ministry of Finance in Ottawa launched a short-term note programme in the US. "About time too," snorted one investment dealer not involved in the deal. "The Export Development Corporation of Canada [a crown corporation whose borrowings carry the guarantee of the Canadian Government has been doing ]ommercial paper since 1978." The Ministry of Finance and the five dealers it has picked are guarded about the amount. According to the Order in Council which sanctioned the borrowing, Canada can issue up to $5 billion. "But we're not contemplating that amount," said Robin Miller, Canada's chief of debt management.
Others close to the deal expect Canada to keep the outstanding amounts down to around the levels of its foreign exchange reserves, which, in mid-October, stood at $3.2