A ‘blank cheque'? Portuguese Second World War sterling balances, 1940–73


  • I am grateful for the comments of three referees; of participants in seminars at the Nova School of Business and Economics (Faculdade de Economia da Universidade Nova de Lisboa) and at the London School of Economics, Department of Economic History; and also those of Alice R. de P. Abreu, Leslie Bethell, Felipe T. Fernandes, Giorgio Fodor, and Rogério L F. Werneck. The usual caveats apply. I am also grateful for research assistance from Vitoria R. de Castro and the staffs of the Bank of England Archive and TNA. I would like to thank the Arquivo Histórico of the Banco de Portugal, the Arquivo Contemporâneo do Ministério das Finanças, the Arquivo Salazar, and Arquivo Nacional da Torre do Tombo, in Lisbon, for help in retrieving documents. Research supported by CNPq, National Council for Scientific and Technological Development, file 310710/2009-0.


The British effort in the Second World War required massive external financing which depended on Lend-Lease and the accumulation of sterling balances. Indebtedness in sterling balances corresponded to almost 38 per cent of this total at the end of the war. Portuguese sterling balances, although a small share of the total, were important because of pre-emptive purchases, especially of wolfram, and because of the ‘gold clause’ which was to be applied to outstanding balances. Portugal's willingness to finance British purchases contrasts with the requirement of German payments in goods or cash for their purchases in Portugal. The settlement of Portuguese sterling balances in August 1945 was singular as it preceded the Anglo-American settlement of December 1945 which had important consequences for sterling balance holders, as the US insisted that the US$3.75 billion loan should not be used to settle British war debts. Postwar settlement of British debt through a long-term loan from Portugal to Britain contrasts with settlements that involved the sale of British assets. Salazar's concerns about the postwar international position of Portugal, the Portuguese Empire, and the survival of the Portuguese regime are relevant in explaining his pro-British stance during and after the war.