asked the Minister for Finance if he will state (a) the natureof the American Loan Counterpart Fund of £41,397,268 referred to in Account XXV of the Finance Accounts for the financial year 1952-53; (b) how it is invested, and (c) the average annual rate of interest earned upon it.
Ceisteanna—Questions. Oral Answers. - Loan Counterpart Fund.
It is somewhat difficult to set out in short compass the nature of the American Loan Counterpart Fund to which the Deputy refers in his question. The first statutory provision in relation to the matter is Section 2 of the Appropriation Act, 1948, which provided that the proceeds of any money borrowed from the Government of the United States of America or any agency thereof should be placed to the credit of an account of the Minister for Finance with the Central Bank of Ireland. Section 4 of the Central Fund Act, 1949, provided that a fund, to be known as the American Loan Counterpart Fund, should be established and that the Minister for Finance might from time to time, as he thought fit, pay into the Fund money for the time being to the credit of the account established under the Appropriation Act of the previous year. Pursuant to these provisions moneys aggregating £40,606,000 were paid into the American Loan Counterpart Fund, as follows:—
|
£ |
|
|
Up to 13th June, 1951 |
18,100,000 |
|
Since 13th June, 1951 |
22,506,000 |
|
Total |
£40,606,000 |
The Central Fund Act, 1949, furthermore provided that the Minister for Finance might from time to time, as he thought fit, invest money for the time being to the credit of the Loan Counterpart Fund in any manner in which moneys of the Post Office Savings Bank might be invested, and in accordance with that provision the Minister for Finance of the day invested money of the Fund in Ways and Means Advances to the Exchequer as follows:—
|
£ |
|
|
Up to 13th June, 1951 |
18,000,000 |
|
Since 13th June, 1951 |
22,500,000 |
|
Total |
£40,500,000 |
The balance of the £41,397,268 referred to in the question—which included interest received on investments—is accounted for as follows:—
|
3% |
State-guaranteed Mortgage Stock of the Agricultural Credit Corporation at par |
£430,000 |
|
3½% |
State-guaranteed Mortgage Stock of the Agricultural Credit Corporation at par |
200,000 |
|
Cash at Central Bank on 31st March, 1953 |
267,268 |
A further provision of the governing statute was that any sums from time to time paid out of the Central Fund for the payment of principal and interest of money borrowed by the Minister for Finance from the Government of the United States of America or any agency thereof should be repaid out of the Loan Counterpart Fund to the Central Fund. Interest on the American borrowings began to run as from 1st July, 1952, and the first payment of interest out of the Loan Counterpart Fund was made on 31st December, 1952. The amount was £571,257. Principal repayments are due to commence on 30th June, 1956.
As regards the Deputy's inquiry about the rate of interest, I should say that a notional rate of 1½ per cent. was fixed to initiate the accumulation in the Fund of a reserve against the charges which would have to be met once interest and principal payments commenced in respect of the dollar borrowings. When interest first began to run on the borrowings the interest paid to the Fund on Ways and Means Advances to the Exchequer was raised to 2½ per cent., the equivalent of the nominal rate on the borrowings. As from 1st January, 1953—in recognition of the fact that the effective interest rate on the dollar borrowings is approximately 2.8 per cent. (because of the increased sterling liability owing to devaluation)—the rate of interest paid to the Fund on Ways and Means Advances was raised to 2? per cent. The average rate of interest earned on the investments of the Fund in 1952-53 was £2 7s. 0d. per cent.
Details of the receipts into and payments from the Loan Counterpart Fund will be found in the published accounts of the Fund for the years1949-50 and 1951-52, inclusive. The account for 1952-53 will be available soon.