asked the Minister for Finance the nature and amount of capital outflows out of the country from 1 January to 30 September 1986; and the reason for the outflows.
Written Answers. - Capital Outflows.
91.
The Central Statistics Office has indicated that the Balance of International Payments statement for the third quarter of 1986 will be published late in December. The breakdown of net capital flows in the first two quarters of this year was as follows:
|
£m |
|
|
Private Capital (including semi-State borrowing) |
+41 |
|
Banking Transactions |
+412 |
|
Official Capital |
+762 |
|
Official External Reserves |
–47 |
|
Net balance on capital account |
+1,168 |
(+ = capital inflow; - = capital outflow)
The balance of payments statements also show a net residual outflow of £991 million for the first two quarters. A residual is a normal feature of balance of payments statistics both here and in other countries, since it is virtually impossible to estimate all flows accurately. The residual is the net sum of all errors (arising for example from timing or valuation differences) and omissions, in calculating the various recorded current and capital flows.
One factor underlying this residual in recent years is the turnaround in our trade balance from deficit to surplus, which could be expected to result in a net extension of trade credit by Irish business. This would show up as an outflow in the residual, since changes in the net balance of trade credit are not captured in the recorded statistics. However, the size of the residual in the first half of 1986 is well above the trend level in recent years. It is believed that the bulk of this increase in the residual, the major part of which arose in the first quarter of 1986, represented speculative flows through leading and lagging of trade payments, and was related particularly to expectations concerning the EMS realignment of April 1986, to the continuing weakness of the pound sterling and, to a lesser extent, of the US dollar.