I propose to take Questions Nos. 13 and 62 together. The joint declaration to which Deputy Noonan refers was prepared with my knowledge and approval.
This declaration did not announce the virtual removal of exchange controls. It confirmed Ireland's commitment to the complete removal of controls, in accordance with our EC obligations, by the end of 1992. It also stated that restrictions on the purchase of medium- and long-term foreign securities by Irish residents will be removed from the end of this year. This change by no means amounts to the virtual removal of exchange controls as Deputy Noonan's question implies.
Restrictions on investment in foreign securities by Irish residents were already eased significantly at the beginning of this year. Residents are now permitted to invest in medium- and long-term securities subject to an annual maximum of £5,000 for private investors and 12½ per cent of cash flow for institutional investors. For 1988, an overall ceiling of £30 million has been imposed on such investment by individuals but, in the event, investment so far this year under this heading has fallen well short of this ceiling. Likewise, investment by institutions is well short of the permitted ceiling.
These ceilings are now being removed. There is no good reason to anticipate that this change will have a significant adverse effect on capital flows because there is no pent-up demand for such outward investment. A further reason for confidence is the improvement in economic fundamentals here and the continuing attractive opportunities for investment in Irish markets. This is demonstrated by the increasing interest on the part of nonresidents in our gilt market. In the first nine months of this year the net nonresident investment in gilts and Exchequer Bills has amounted to £741 million compared with a total of £460 million for the whole of 1987.
I would point out that commentators have been unanimous in their approval of the changes that are now being introduced. There is a consensus that these can only be in the long-term interest of our economy. The practical commitment to the gradual lowering of controls can only enhance the international perception of Irish markets. I would also point out that, if these changes were not made now, it would be necessary before the end of the year to seek a continuing derogation from our EC obligations. Community directives already in force require that there should be freedom, without restriction, throughout the Community, to buy and sell medium- and long-term foreign securities. We could hardly expect agreement to a further derogation at a time when some other member states of the community are moving much faster than us in dismantling their controls and at a time when there has been such a marked improvement in our balance of payments. In this context, it must be noted that the criteria on which our derogation is based are difficulties, or the threat of difficulties, in a country's balance of payments.
Continuing prudent management of the economy is, of course, the crucial element if we are to reap the benefits from capital liberalisation. Movement towards liberalisation should be seen both as a reflection of existing confidence in the economy and as an assurance of the Government's firm commitment to continuing sound economic management.