asked the Minister for Finance the extent to which external investment has decreased in the economy in the first quarter of 1975.
Ceisteanna—Questions. Oral Answers. - External Investment.
42.
Presumably the Deputy is referring to the level of private capital investment from abroad in the first quarter of 1975. The level of such investment is usually calculated by reference to the change in official external reserves and the balance of payments position on current account. Since the latter is calculated on an annual basis only, it is not possible to estimate what the capital inflow was in the first quarter of this year. I might add that the private capital inflow in 1974 was exceptionally high at £120 million compared with an out-turn in 1973 of £40 million.
£127 million.
I thank the Deputy for topping it up.
Does the fact that our external reserves had decreased from £495 million at 31st December, 1974, to £472 million at 31st March, 1975, indicate that there is a considerable falling-off if not a complete drying-up of the capital inflow which was such a satisfactory aspect of our 1974 external financial position?
Changes in external reserves can come about by reason of a variety of circumstances. For instance, the trade figures show that the trade deficit rose from £77.5 million in the fourth quarter of 1974 to £108.2 million in the first quarter of 1975. Taken in isolation, this would reduce the reserves. Such information as is available suggests that private inflow has continued at a satisfactory level and, indeed, at a level which exceeds previous experience.
Has the Minister any explanation for the fact that our external reserves, which went up by £60 million during the calender year 1974, decreased between 31st December, 1974, and 31st March, 1975, from £495 million to £472 million? What explanation has the Minister to offer for that ominous decline in our external reserves?
I would ask the Deputy not to add to the number of mischievous and inaccurate comments. The size of external reserves can be attributable to a number of different circumstances including, in any one period, the quantity of money borrowed abroad by the State. Taking one period with another, we have not engaged in the same quantity of foreign borrowing this year as we did last year and that, in itself, would be reflected in the size of the external reserves.
I must say that is a reasonable attempt at an explanation by the Minister and clearly indicates that my query is not mischievous.
The Deputy used the word "ominous" which is not warranted.
It is ominous. The Minister is aware of the fact that, despite the very difficult circumstances which obtained right through 1974, our external reserves actually increased by £60 million. That trend was reversed in the period between December last year and March of this year. This is something to which we should direct attention. I was asking the Minister reasonably if he had any explanation to offer for that ominous trend. If he offers it, I am prepared to accept that the fact that the State did not borrow during that period is one explanation. Is that his view of why our external reserves not only did not increase but actually decreased very significantly in that short period?
I am suggesting to the Deputy that it is improper to use the emotive word "ominous". One of the reasons why resort was not made to foreign borrowing to the same extent is that the sale of Government securities on the domestic market has very significantly and successfully increased in the same period. Accordingly, the necessity to borrow so extensively in the foreign market did not arise.
Question No. 43.
In his budget speech the Minister indicated that he would be borrowing abroad to the extent of £225 million. Is that estimate still valid or does this factor to which he has adverted—the satisfactory sale of Government securities on the home market—alter that overall position in regard to our foreign borrowing requirements?
If the present patterns of activities on the domestic market continue the need to borrow so significantly on the foreign market will not arise. It is not possible at this stage to forecast what the outcome will be at the end of 1975. I should not like to engage in prophecy.
The Minister gave an estimate in his budget of £225 million.
That is correct.
We must pass on to another question.
There has been quite a significant change both in the domestic and foreign financial markets and it is not possible at this stage for anybody to engage in an intelligent way in clairvoyancy as to what the outcome may be at the end of 1975.
Would the Minister agree that because of an international lack of confidence in this Administration he is finding it difficult to borrow abroad?
No. There is alsolutely no truth in that. We are having far greater success than any comparable economy.