1
3.
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38
The
given seasonal fluctations, by nearly twenty per cent
and, unless there is an extraordinary decline of revenue
later in the year or very heavy special expenditure,
it now seems unlikely that there will be a deficit.
advances to loan account provided for in the estimates
amount to approximately $2,600,000 and, on the basis of
the foregoing expectations, the Colony's cash resources
should be fully adequate to meet those advances.
6.
The Colony is not therefore in need of any
more actual cash at present and, if the $11,000,000
balance of the 1934 loan were to be raised at present,
the proceeds would have to be reinvested, at any rate
temporarily, in gilt-edged securities. Interest on
these securities would probably not quite offset the
interest payable on the Colony's own loan, because the
reinvestment would have to be in comparatively liquid
securities; it would also be necessary to meet sinking
fund charges on the new loan. A further consideration
is that if the revenue continues to maintain its present
buoyancy the nominal surplus of assets is likely to be
increased and conceivably it may be desirable to consider
writing back to revenue some of the expenditure now
charged to loan account.
7.
I consider, therefore, that the only reason
for issuing a loan immediately would be if there were
reason to fear a considerable increase in the rate of
interest and I shall be glad to have your views on that
possibility. So far as my information goes there is no
present indication of such a rise, as gilt-edged securities
appear to have been rather firmer in the last few months
than they were earlier in 1937 and if the feared recession
in trade takes place it would be natural to expect this
to be accompanied by a fall in the rate of interest on such