Loans Affair

The Loans Affair, also called the Khemlani Affair, was a political scandal involving the Whitlam Government of Australia in 1975, in which it was accused of attempting to unconstitutionally borrow money from Middle Eastern countries through the agency of Pakistani banker Tirath Khemlani, bypassing standard procedures of the Australian Treasury. Minerals and Energy Minister Rex Connor, along with Treasurer and Deputy Prime Minister Dr Jim Cairns misled Parliament and were forced from the Whitlam Cabinet over the Affair, which was a key precursor to the Constitutional Crisis and the Dismissal of the Whitlam Government in 1975.

Minerals and Energy Minister Rex Connor wanted funds for a series of national development projects. He proposed that to finance his plans, the government should borrow $US 4 billion. It was a requirement of the Australian Constitution that non-temporary government borrowings must be through the Loan Council. Although the development projects were long-term, Whitlam, together with ministers Cairns, Murphy and Connor authorised Connor to seek the loan on 13 December 1974, without involving the Loan Council. Connor had already been investigating the loan. Through an Adelaide builder, he had been introduced to Pakistani dealer Tirath Khemlani. According to Khemlani, Connor asked for a 20-year loan with interest at 7.7% and set a commission to Khemlani of 2.5%. Despite assurance that all was in order, Khemlani began to stall on the loan, notably after he was asked to go to Zurich with officials of the Reserve Bank of Australia to prove that the funds were in the Union Bank of Switzerland as he had claimed. The government revised its authority to Connor to $2 billion.

Tirath Khemlani played a pivotal role. He was employed by Dalamal and Sons, a London-based commodity-trading firm

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