Bretton Woods Agreements Bill, 1957—Second Stage.

Question proposed: "That the Bill be now read a Second Time."

Minister for Finance (Dr. Ryan)

The International Monetary Fund and the International Bank for Reconstruction and Development were set up under the Bretton Woods Agreements of July, 1944. Copies of the agreements are scheduled to the Bill. The main purpose of the fund is to maintain reasonable stability of exchange rates, encourage the removal of restrictions on current international transactions and provide resources to enable member countries to meet temporary deficits in their balance of payments without resorting to restrictive measures. The International Bank was established to provide and facilitate international investment for increasing production, raising living standards and helping to bring about a better balance in world trade. The resources and facilities of both institutions are available only to members.

When I was speaking in the Dáil last week I mentioned that the resolutions setting forth the terms and conditions on which Ireland would be admitted to membership are being submitted to the respective boards of governors of the two institutions for approval by postal vote and that invitations to join may be expected very shortly. The resolutions provide for a subscription to each institution of $30,000,000 (£10.7 million). The various calculations in the explanatory memorandum circulated with the Bill are, therefore, confirmed, apart from the slight adjustment to which I referred in the Dáil as between the gold subscription to the fund and the amount payable in Irish currency. Our gold subscription to the fund has been fixed at $4.5 million (£1.6 million) or 15 per cent. of our quota. This is liable to be increased later if our official gold and dollar holdings increase materially. The balance of $25.5 million (£9.1 million) is payable in Irish currency.

In the case of the bank, we are required to pay $0.6 million (£0.2 million) or 2 per cent. of our subscription in gold or U.S. dollars and a further 18 per cent. in Irish currency. The remaining 80 per cent. may not be called up except to meet defaults on loans made by the bank. In regard to the proportion of 18 per cent. of each share payable in local currencies, the International Bank expects members to release these balances so far as they can to meet its capital requirements for lending purposes. It is anxious to have these releases made in convertible form, which in the case of this country would mean convertible at least into sterling or E.P.U. currencies. While there is no legal obligation to make these releases in convertible form, most members have done so and we may agree to release portion of the subscription in sterling or other E.P.U. currency. The exact extent of the release remains to be settled in negotiations with the bank.

Membership of the fund and bank will involve a total immediate cash payment in gold and United States dollars of $5.1 million (£1.8 million). This, together with the proposed release of the bank subscription in convertible form, will be financed by adjustments as between the Foreign Exchange Account and the Exchequer.

The payments in Irish currency to both institutions may be made in the form of non-negotiable non-interest-bearing demand notes to the extent that our currency is not needed for their operations. These demand notes will be lodged with the Central Bank which must be designated as the depository of the fund's and bank's holdings of Irish currency.

Membership of the fund entitles a country to borrow within certain limits to meet a temporary deficit in its balance of payments. The subscription or quota determines how much a member may obtain. A country may normally borrow up to 25 per cent. of its quota in any period of 12 months and up to a total amount equal to twice its quota. The fund has power to waive these limitations in special circumstances, and, in fact, it has used this power a number of times over the past year.

Borrowing from the fund must be repaid within a relatively brief period. The Articles of Agreement provide that one-half of any loan must be repaid in gold or convertible currencies within a year together with one-half of any increase or less one-half of any decrease in the period in the borrowing country's monetary reserves. The balance must be repaid within a maximum period of five years. A service charge of 1/2 per cent. is at present payable by members on borrowings within their quotas; charges up to a maximum of 5 per cent. are levied on borrowings in excess of their quotas. All charges are normally payable in gold.

The International Bank operates mainly by the making or guaranteeing of loans to Governments or other borrowers. Loans to borrowers, other than member Governments, require the guarantee of the Government, Central Bank or other comparable agency of the country concerned. In contrast with the borrowing facilities provided by the fund, there is no necessary relationship between the amount of a member's subscription to the bank and the extent of the accommodation which the bank may afford. Loans are made for productive purposes only. In recent years they have been designed for the most part to provide basic aids to production, such as the expansion of electric power facilities, railway, port and highway improvement and agricultural development. Total loans granted by the bank up to 31st December, 1956, amounted to £063,000,000, comprising 163 loans in 44 countries.

In addition to its loan facilities, the bank gives advice on request on particular economic and financial problems and on general development plans, even where these are not related to bank investments. For these purposes, it organises survey missions to member countries. The bank also provides facilities for the training of officials in planning, administration and management.

The terms and conditions of interest, commission charges and amortisation payments, maturity and dates of payment of each loan are determined by the bank. In the case of a recent loan for a period of five years granted to the Finance Corporation for National Reconstruction of the Netherlands the rate of interest was fixed at 5? per cent., including 1 per cent. commission. Consultation between the bank and the borrower extends throughout the life of the loan.

Our main interest in joining these institutions is to avail of the facilities of the bank. Besides giving access to valuable advisory services, membership would open to this country the possibility of supplementing to some extent the domestic funds available for capital development. So far as the fund is concerned, the likelihood of our availing ourselves of the short-term borrowing facilities to meet temporary deficits in the balance of payments is remote. Borrowing of our currency by other members is also most improbable as none of the members of the fund is likely to need our currency in view of the large favour-able trade balances which they normally enjoy with us.

The powers of the fund and bank are vested in boards of governors, to both of which every member is entitled to appoint a governor, normally the Minister for Finance of the country concerned, and an alternate. Effective exercise of the fund's and bank's powers rests with boards of executive directors, which have at present 17 members, five of whom are appointed by the five state members having the largest quotas (the United States, United Kingdom, France, China and India), three by the Latin American Republics and the remaining nine by the other members. Elections of executive directors are held every two years. Day to day management of each institution is in the hands of a managing director.

Voting rights in the fund and bank are measured by the size of quotas. Each member has a basic 250 votes plus one vote for every $100,000 of its quota. The voting power of Ireland on the basis of a quota of $30,000,000 would, therefore, be 550 in each institution. This is quite negligible in relation to a total voting power in each institution of approximately 100,000. In the sphere of management in which the executive directors are concerned, the use of the Irish votes would be determined by the executive director of the group of members to which Ireland would be assigned. The votes of any group are cast as a unit by its executive director.

When we have become members of the fund and the bank, we will be in a position to consider joining the bank's new affiliate, the International Finance Corporation. The purpose of this institution is to encourage the growth of productive private enterprise, particularly—but not exclusively —in the less developed member countries. It will finance only private enterprises and will not invest in undertakings which are government-owned and operated or in the management of which the government participates to any significant extent. In the earlier years it proposes to make most of its investments in enterprises which are predominantly industrial. It is necessary for prospective members to have first joined the fund and bank. A further subscription, which may be of the order of 1 per cent. of our quota of $30,000,000 in these institutions, is payable. The corporation has only recently commenced operations; its first loan was made a few weeks ago.

A member may withdraw from the fund and the bank at any time and is entitled to be repaid its capital subscription to both institutions. Any debts it may have incurred before withdrawing would, of course, have to be settled and it would be liable for contingent liabilities of the bank as long as any part of the loans or guarantees contracted before it withdraw was outstanding.

Professor O'Brien

Of course, joining the International Monetary Fund and Bank is a reasonable step and nobody could criticise the Minister for taking it at the present time. The only reason, I assume, that this step was not taken before was that the purposes of the fund and the bank were rather obscured in earlier years, owing to Marshall Aid. These two institutions which we now propose to join play a useful part in the maintenance of an orderly monetary system in a somewhat disorderly economic world. It is right that every country which is anxious to participate in the international community of trade and finance should become a member of these two bodies.

It is only fair to say that they have not lived up entirely to the high hopes of their founders, because the international atmosphere since Bretton Woods was different from what was foreseen at the time. The main architect of these two institutions was, I think, the late Lord Keynes, who was obsessed by the fear of a post-war depression. The whole structure of these institutions was meant to enable countries to isolate themselves from depressions without the necessity of internal deflations. They were based on the sad experience of the 1930's which it was determined would not be allowed to recur.

In fact, conditions in the post-war period have been quite different. Since the war, there has been no sign of depression anywhere. On the contrary, there has been an inflation which, I am sorry to say, is increasing, if anything, to-day. Therefore, the main purposes of these institutions, the isolation of member countries from world depression and unemployment, have not really arisen. But now the institutions seem to be coming into their own again since Marshall Aid is finished and the international situation is becoming slightly more normal than it was in the earlier years after the war.

It is important that public opinion in this country should realise that joining these institutions will not solve any of our problems. It will not prove anything in the nature of a magic wand waved to save us from the necessity of pursuing the sane, conservative and orthodox financial policy, of which evidence is to be found in the Finance Bill which we debated last week. Our balance of payments problem will not, in the circumstances of this country, be helped in the very least by membership of the fund. Loans of foreign currency from the fund are meant to be temporary and very expensive. They must be repaid rapidly with a high rate of interest. They are simply meant as the last ditch in a crisis when all other forms of meeting a country's debts have been temporarily exhausted.

For a country like this, which is still in possession of very large external reserves despite the sad depreciation of recent years, resort to the fund seems to me to be a remote possibility. It is not perhaps irrelevant to remark that one of our great agricultural competitors, one of the countries which we are always exhorted to study and copy has had to resort to the fund in recent months, namely, Denmark. I think it points to the essentially stronger position of this country in the international field that Denmark should have to resort to this very expensive method of getting temporary accommodation, whereas we still are not within sight of anything of that nature. As we are constantly being exhorted and extolled to model our affairs on Denmark, it is interesting to see that that country should be in financial difficulties much greater than our own and should be imposing deflation of a kind which, I believe, Irish public opinion would not tolerate for a moment.

Denmark is the latest borrower from the monetary fund. It has had to borrow on the accepted onerous, almost punitive, terms. It will be expected to repay its borrowing in a very short period. The only way in which it can repay its borrowings is by putting its house in order in the very unpleasant way in which a country which is a debtor country without external resources has to put it in order, that is by a severe internal deflation. We have not come in sight of that yet. I do not believe we will come in sight of it if a correct financial policy is pursued for the next few years.

In fact, our entry into this fund will to some extent limit our financial freedom. At present, the position is that under the Currency Act and the Central Bank Act, we are completely free to alter the exchange parity of our currency without consulting anybody. There seems to be some sort of an idea rife in certain circles that the parity of the Irish £ is in some way or other dictated by pressure from outside. There is not the slightest basis for that belief. It is entirely without foundation. The Oireachtas to-morrow could change the exchange parity of the Irish £ without anybody in the world interfering with us or expressing disapproval. Nobody has the slightest right to interfere with us in that particular step at present.

That will not be the case when we join the fund. Membership of the fund entails an obligation to preserve existing exchange parties, except for variations within certain limits. Membership of the fund will not permit countries to vary exchange parity by more than 10 per cent. from the existing parity without consultation with the fund. As I read this statute, if any country should do so, it would cease to be a member of the fund because it would have broken one of the essential obligations of the fund. One of the main purpose of the fund was to prevent competitive exchange depreciation of the sort which wrought such havoc in the 30's.

When Ireland joins the International Monetary Fund, it will have tied its hands in the matter of exchange depreciation. Personally, I think that may not be a bad thing because, as I said last week on the Finance Bill, rumours of a devaluation of the Irish £ can do immense harm in the country; and the fact that the Irish currency is now linked more firmly with the currency of other countries will, I think, reduce the amount of rumours of that kind.

It is only correct and fair to say that membership of the fund unfortunately has not prevented serious devaluations in the past ten years, but I do say that, if the various countries which are members of the fund had not been members, there would have been even more severe and more irresponsible devaluations than have taken place. The main criticism I made of the fund was that it was designed to prevent a repetition of the events of the 1930's. In the world of politics as in the world of personal life, it is always a mistake to relive the past. The problems of the 1950's are different from the problems of the 1930's. We have not had the dangers of depression and deflation. Similarly, the fund was trying to avoid the chaotic exchange conditions of the 1930's and that was why these provisions regarding the variation of exchange ratios were inserted.

Unfortunately, owing to the internal inflations of various countries, devaluations of some of the leading countries —for example, the £ sterling—became unavoidable. They were the natural and inevitable consequence of bad monetary policy at home. But the very fact that the central banks and the various Governments are bound to consult the International Monetary Fund, before they take a step of this kind outside the narrow margin of 10 per cent., is undoubtedly a restraining influence on unwise internal policies which may lead to devaluations and on the irresponsible and unwise rumours occasionally put around about the pending devaluations of currencies, with all the evil consequences—lack of confidence and speculation—to which those rumours can give rise.

I do not believe that Ireland will ever have to resort to the fund for currencies in order to bridge temporarily the disequilibrium in the balance of payments. I think the country is still too financially strong to have to resort to that type of borrowing. I rather gathered from what the Minister said that our main reason for taking the steps we are taking to-day is to join the bank rather than the fund, because one cannot join one without the other. I am sorry to repeat what I said last week, but I feel so strongly about the matter that I think it a duty to do so. I think it extremely unwise for this country at the moment to incur fixed interest obligations abroad. For Ireland to borrow from the International Bank, at the high rate of interest which that bank is charging, would be an extremely unwise and unnecessary step in the circumstances of this country.

It is bad enough to face the prospect —I am glad that I am not the Minister for Finance having to face the prospect —of borrowing at home in this period of extremely high interest rates. Interest rates at the moment all over the world are extremely high. The world is suffering from a shortage of capital and no Government at the present moment is able to borrow on anything like favourable terms. I am afraid that all the pointers seem to indicate that matters will get worse instead of better. But for a country to incur fixed interest obligations with an exchange risk—fixed interest obligations which, when they come to be honoured, may involve paying a higher rate for the external currencies in which they are made—is adding greatly to the real rate of interest, which already is high enough. Therefore, although I think we are right to join the International Bank, I think we would be very foolish and very ill-advised ever to use it as a medium for borrowing. The fact that such a strong country as Holland has had to pay over 5½ per cent. for accommodation should be a warning to us that a country with the external assets which we still possess should not have to resort to accommodation of this kind.

As I said last week and as I think most people will agree, in so far as we attract foreign capital into this country, we should attract foreign equity capital. We should not tie the millstone round our necks of fixed interest obligations, especially, as I said, in terms of other currencies where we might find ourselves faced some time or other with an unfavourable rate of exchange. The great advantage of equity capital is that the people who invest it take the risks; they are prepared to lose it and the borrowing country incurs no contractual obligations towards anybody. People who are prepared to risk their capital in other countries no doubt have considerable knowledge of their business; they have expert knowledge and possess managerial efficiency. They will be animated keenly by the profit motive; they will be dealing with a business which presumably they fully understand. Therefore, to the extent to which we require external capital for our development, we should concentrate on making the country attractive for equity capital and certainly should not borrow from the International Bank.

I think there has been a certain amount of confusion regarding the extent to which Ireland should be properly described as "an undeveloped country." I think the word "undeveloped" is now being used in two rather different senses. It has been used in one sense in relation to the International Monetary Fund and Bank and in another sense in relation to the European Free Trade area. I think that, in relation to the International Monetary Fund and Bank, what was meant by an undeveloped country, when the bank was set up, was, first of all, countries devastated by the war—that problem has passed over now—and also countries which were not in a position to provide capital for their own development. Since the Free Trade Area discussions started in the last few months, the words "undeveloped country" are being used in rather a different sense, to include Ireland. The word has been applied to Ireland because our industrial revival has been of rather recent growth and it is regarded as being undesirable that countries like ours should have to face the full competition of more industrially developed countries, without a period of consolidation and a period of delay.

I think the use of the expressions "undeveloped area" or "undeveloped country" in relation to the free trade discussions has, perhaps, given a false impression. Ireland is not an undeveloped country, in the sense of that word as used in the Bretton Woods Agreement. As I said last week, we have abundant capital. The trouble in Ireland is not that the capital is short, but that, for reasons which we need not enter into now, the owners of capital prefer to invest it to a very large extent abroad rather than at home. Ireland has no shortage of capital. It is a strong creditor country. Irish residents and Irish citizens own very large holdings of foreign securities which, as I said last week on the Finance Bill, could be repatriated and invested at home. Furthermore, if the opportunities were sufficiently attractive, foreign capital would come in. There have been references in the newspapers in the last couple of days to American investors who are prepared to invest in Ireland.

Therefore, I think we are not an undeveloped area in that sense of the word, that we are not in any sense the type of country which was envisaged by the Bretton Woods Agreement as needing loans from the International Bank and that we certainly should not seek them, except as a very last resort. I think the Minister would agree with most of what I have said. I do not think I have said anything which contradicts what he said either in the Dáil or in this House. In both Houses he stressed that perhaps the most valuable service we could get from the International Bank would be technical advice, the advice of economic and technical experts regarding the development of Ireland.

I do not wish to belittle in any way the services of some of the eminent economists who have given advice in the past. Above all, I think it is only fair to say here publicly that the present manager of the International Monetary Fund, Dr. Jacobsson, gave us four years of service from 1934 to 1938, of which it is quite impossible to exaggerate the value. But, then, Dr. Jacobsson is an exceptional person. In fact, I think he is unique. If there were more Dr. Jacobssons in the world, I would be more enthusiastic about seeking the advice of distinguished foreign economists. However, the fact of the matter is that Irish conditions are very peculiar. Irish economic problems are unlike those of other countries.

Many of the foreign advisers who have come here in recent years, although eminent people have not, in my opinion, quite got down to the reality of the Irish situation. I have heard some things by people of the greatest eminence which I can only describe as naive. They do not really get down to the reality of our problems.

We suffer in this country a little from an inferiority complex. We have the idea that because a man is a foreigner, he must be better than we are. In regard to this question of economic advice, I have no doubt at all that the Irish Government can get as good advice at home as it can get from the International Bank. It can get advice from people who know the circumstances of the country and who do not have to study it merely as a case history.

As I said in the debate on the Finance Bill this country has not suffered through lack of good advice. I do not think any country in Europe probably—and I would say not only since the Treaty but in the last 70 or 80 years—has had the attention of more economic doctors. It is the sign of a country which is either sick or hypochondriac that its bed is surrounded by specialists and consultants looking on at it year after year. Looking back on the history of Ireland in the 19th century, it is the certain sign of a sick country that it has never been without elaborate medical consultations. Some of the greatest commissions in history —the Devon Commission, the Bess-borough Commission, the Financial Relations Commission and the Recess Committee—have all investigated Irish affairs. There never was a country that had more eminent consultants sitting around its sick bed. Since the Treaty, I cannot remember a time when there were not at least three commissions sitting to advise on the economic problems in Ireland.

The trouble in this country has not been lack of advice but lack of the courage to take the advice which occasionally is politically unpalatable or unpopular. I think that, just as we have not got to go to America for capital, we have not got to go to America for advice. Our own capital is better than American capital and I suggest our own advice is better than American advice. Therefore, I sugges that, although we shall join this club I hope we shall not make very much use of it. We shall pay our annual sub scription, but we shall regard some of the facilities it will give its member with a certain amount of suspicion. The loans of currency from the International Monetary Fund and, stimore, the long-period loans from the bank, may be unnecessarily expensiv for a country which has all the capital it wants at home.

With regard to the advice given by these eminent experts, often speaking a foreign language, often having to be taught the elements about Ireland and given the Census and Statistical Abstract and who begin just exactly at the point at which a first year student in a University begins, it may be that, at the end of five years, they will produce some naive platitudes. At least they may say something which has already been said over and over again by Irish economists, but not always attended to by the responsible Minister.

Therefore, while welcoming our admission to these two great institutions, I would hope that the Irish public will not think they will in any way relieve us of responsibility for pursuing an orthodox, conservative and proper money policy. There are no fairy godmothers in Bretton Woods or elsewhere who will make us richer by waving magic wands.

Dr. O'Donovan

After the excellent speech we have just heard from Senator O'Brien, I am afraid my few disjointed comments will seem very mediocre by comparison, but I want to make one or two remarks.

In the first place, I notice that both the Minister and Senator O'Brien do not expect very much from our joining the International Monetary Fund and the Bank. I notice the Minister is rather diffident in the way he mentions the possibility that we might borrow from either of these institutions. I can well see why he should be diffident about suggestions of borrowing from the fund. As far as I can see, one does not borrow from the fund unless either one is in the most serious balance of payments difficulties or technical currency difficulties have arisen in another way. I think, however, it is worth drawing attention to the fact that the joining of the bank and the fund denotes a change of attitude on the part of the present Government Party. It is no longer a mortal sin to contemplate borrowing abroad: there was a time when it was.

We borrowed $128,000,000 under Marshall Aid at a very low rate of interest and at an average rate of $3.2 to the £. Time and again it was suggested on the part of the Fianna Fáil Party in the Sunday Press that that money was borrowed at the rate of $4 to the £ and would have to be paid back at $2.8. That was done on numerous occasions. I recall an article in the Sunday Press last year in that respect by Mr. J.P. Colbert. There was the suggestion that the money was borrowed at $4 and would have to be paid back at $2.8; in other words that there would be an increase in the rate of borrowing. There was a moderate increase, in increase from 3.2 to 2.8, but, considering the very low rate of interest, that was not serious if you have a low rate of interest—a rate of interest of 2½ per cent. which was not to start for some years after the borrowing was made.

Mr. Lenihan

On a point of order, what is the relevance of this to the Bretton Woods Agreements?

An Leas-Chathaoirleach

I think Senator O'Donovan is very much in order.

Dr. O'Donovan

I think it is very much to the point. The fact is that the borrowing made under Marshall Aid was of the greatest assistance to this country. Having regard to the terms under which it was made, terms which were altogether better than those which could be got to-day, it is right and proper that I should defend it here. I notice that at the time it was being made the Fianna Fáil Party made no attack on it at all. In fact, they had made the arrangements, before going out of office in 1948, to join O.E.E.C., which was involved in it.

We ought to be careful, if we do borrow. However, like Senator O'Brien, I do not think there will be any such necessity whatsoever. If we were to borrow from the fund, we would do it only in the case of crisis. It may have been noticed that I am very slow to use the word "crisis". That word has been beaten to death in this country since the end of the war. There was a fuel crisis, a wheat crisis, this crisis and that crisis—all of which were just temporary situations which could be attended to like other matters. Therefore, I do not believe, with Senator O'Brien, and with the Minister—to judge by the diffident way in which he mentioned it—the circumstances will arise in which we shall have to borrow from the fund.

As regards the bank, I notice the Minister seemed to think that possibly we might supplement, to some extent, our local resources and that that might be useful. I agree also with Senator O'Brien that we are not an undeveloped country in the sense that some other countries are undeveloped, as, for instance, Indonesia and South America are undeveloped. We have adequate resources of our own, particularly in relation to internal development.

I noticed recently that one of the United States agencies has two rates for lending—2½ per cent. if the agreement is drawn up in terms of United States dollars and 4 per cent. if the agreement is drawn up in relation to the currency of the country making the borrowing. If ever we should have to borrow again from the United States, I think we would be well advised to borrow at 4 per cent. That will be gathered from the remarks I made on the last day on the Finance Bill. We would be very well advised to pay the 4 per cent. rather than the 2½ per cent., expressed in terms of dollars. We might not be as lucky as on the last occasion when we did very well because we were so late into Marshall Aid that most of the other countries had drawn most of their requirements. We benefited by being late in the field.

I should like to express disagreement with Senator O'Brien. He suggested that we would be tied in certain circumstances and prevented from devaluing our currency. That is a very doubtful bet because it was a step taken by the sterling area in 1949 and it was a member of the International Monetary Fund. Apparently they made up their minds that they had to devalue but they could not do it until after a meeting of the fund in September that year. In the intervening months the international monetary speculators had every opportunity to make enormous sums. We had many discussions about it in the Department of Finance at the time. Subsequently certain countries were asked to leave the "club"—as it has been called—owing to their activities. I just beg leave to doubt that, being tied, they could not devalue without giving notice. In relation to this country it is a theoretical question if we maintain our present parity with sterling.

I do not want to misinterpret Senator O'Brien. It is quite obvious that what he had in mind was that there might be a certain restriction on a certain kind of activity by politicians if they were short of money. I think that was what he had in mind and on the whole I think our politicians are to be trusted. I welcome the Bill and I think that the Minister is to be congratulated on introducing it. I think it will be helpful just as the many small matters which the Department of Finance has attended to in recent years have been helpful in their sum total. We had the arrangements about purchasing Irish securities and the arrangements made for the backing by dollars of the legal tender note circulation. We also had the premium bonds and all of these steps taken together-each of them small in itself—add up to the sum total of the efforts made by the Department of Finance to bolster and strengthen the position in this country.

I think that is the way in which financial procedure does lead to progress. You have many facets of the financial mechanism by which you can strengthen the position and for that reason this is a further strengthening of the overall position. The Minister is to be congratulated on introducing the Bill within such a short period of his coming into office.

Dr. Ryan

I quite agree with the two previous speakers. The joining of these institutions will not solve our problems, but may help in that direction. As Senator O'Donovan put it, a number of small aids may add up to a fairly substantial aid in the end. I think that is the kind of idea we have in mind when joining these institutions. As I said at the beginning, I hope that we will not have any recourse to the fund. The possibility of our doing so is remote. If we realise, as I think all Parties do, that the problem of balancing our payments is our own, then if we have recourse to the fund it will indicate that we have failed. I sincerely hope it will not be necessary to have recourse to it.

As I said, we would hardly have joined were it not a condition that we had to join the fund as well as the bank. We had an opportunity of getting good advice from the bank and, while I agree with Senator Professor O'Brien that we should not minimise the advice we are getting, we may get some advice from foreign sources, from people who have had experience of reviewing conditions in other countries and who may be able to offer some useful advice to us here. I do not think there is any possibility that the Government would accept that advice before getting the comments of our own advisers who have experience of the conditions of this country. I should like any Senator who might have that apprehension in mind not to give into it too seriously.

I quite agree with Senator O'Brien that the ideal way to get money from foreign sources is into equity investment here. Then the difference in the rate of exchange between the countries would not matter. The investor, not the Government, would be taking the risk, as far as that particular investment was concerned.

As regards Senator O'Donovan's idea of what the Fianna Fáil attitude has been on foreign borrowing, I do not think that we thought it was a mortal sin. The occasion of sin arose on spending rather than on the borrowing. I think I made it clear in my statement that we should borrow only where we had a good productive scheme in mind and we should make very sure, as Senator O'Brien said, that the conditions attaching to the loan were not too onerous with regard to interest, repayment or anything else.

Question put and agreed to.

Agreed to take remaining stages to-day.

Seanad Éireann debate - Wednesday, 10 Jul 1957