1976 UK sterling crisis

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The 1976 UK Sterling Crisis was a balance of payments or currency crisis in the United Kingdom in 1976 which forced James Callaghan's Labour government to borrow $3.9 billion ($17.7 billion in 2020)[1] from the International Monetary Fund (IMF),[2] at the time the largest loan ever to have been requested from the IMF.[3]


The crisis took place during James Callaghan's term as Prime Minister,[4] and caused the Bank of England to withdraw temporarily from the foreign exchange market.[5] After the defeat of the public expenditure white paper in the House of Commons in March 1976 and the resignation of Harold Wilson, many investors became convinced the pound would soon lose value due to inflation. By June 1976, the pound had reached a record low against the dollar.[3]


Only half of the loan was actually drawn by the UK government and it was repaid by 4 May 1979.[6] Denis Healey, the Chancellor of the Exchequer at the time, went on to state that the main reason the loan had to be requested was that public sector borrowing requirement figures provided by the treasury were grossly overstated.[7] Despite this all terms required by the IMF were fully implemented.

The IMF loan meant that the United Kingdom's economy could be stabilised whilst drastic budget cuts were implemented. Despite the security provided by the loan, the Labour Party had already begun separating into social democrat and left-wing camps, causing bitter rows inside the party and with the unions. Some believe this may have contributed significantly to Margaret Thatcher's 1979 Conservative victory.[8]

See also[edit]


  1. ^ 1634–1699: McCusker, J. J. (1997). How Much Is That in Real Money? A Historical Price Index for Use as a Deflator of Money Values in the Economy of the United States: Addenda et Corrigenda (PDF). American Antiquarian Society. 1700–1799: McCusker, J. J. (1992). How Much Is That in Real Money? A Historical Price Index for Use as a Deflator of Money Values in the Economy of the United States (PDF). American Antiquarian Society. 1800–present: Federal Reserve Bank of Minneapolis. "Consumer Price Index (estimate) 1800–". Retrieved 1 January 2020.
  2. ^ "National Archives". Archived from the original on 11 January 2021. Retrieved 17 December 2015.
  3. ^ a b "Sterling devalued and the IMF loan". The National Archives. Archived from the original on 22 February 2014. Retrieved 17 December 2015.
  4. ^ "BBC On This Day". 5 April 1976. Archived from the original on 7 March 2008. Retrieved 17 December 2015.
  5. ^ Rogers, Chris (2009). The Politics of Economic Policy Making in Britain: A Re - assessment of the 1976 IMF Crisis (PDF). University of Warwick. p. 17. Archived (PDF) from the original on 14 November 2016. Retrieved 17 December 2015.
  6. ^ Denis, Healey (1990). The Time of my Life. Penguin. p. 432. ISBN 978-1842751541.
  7. ^ Moran, Joe (4 September 2010). "Defining Moment: Denis Healey agrees to the demands of the IMF". Financial Times. Archived from the original on 23 March 2019. Retrieved 23 March 2019.
  8. ^ "1976 government papers". BBC News. 29 December 2006. Archived from the original on 3 September 2017. Retrieved 24 December 2015.

Further reading[edit]