9
THURSDAY, MARCH 4, 1993
QUESTION: DEFICIT
MR MACLEOD, WILL YOU PLEASE EXPLAIN WHY THE BIG IN THE NEXT FEW FINANCIAL YEARS IS NECESSARY, AND WILL YOU PLEASE GIVE SOME REASONS FOR THAT?
FS:
OK.
QUESTION:
I WANT TO ASK A SECOND QUESTION.
FS:
CAN YOU STOP THERE FOR A MINUTE, OTHERWISE
I
WILL FORGET IT.
FS:
WE HAPPEN TO HAVE A FINANCIAL POSITION WHICH IS NOT ONLY HEALTHY BUT IS MORE HEALTHY THAN WE HAD PLANNED FOR. THAT IS THE RESULT OF THINGS WHICH ARE WELL UNDERSTOOD: THE REVENUES WERE HIGHER THAN WE EXPECTED AND WE ALSO HAD CAPACITY PROBLEMS IN ACTUALLY SPENDING ALL THE MONEY ON CAPITAL WORKS. SO WE END UP WITH RESERVES OF ABOUT $120 BILLION. WE HAVE NEVER SAID WE NEED RESERVES OF ANYTHING LIKE THAT SIZE. AT THE SAME TIME WE ARE FACED WITH REQUESTS, SUGGESTIONS, FOR A RANGE OF SERVICES AND PROJECTS ON WHICH WE SHOULD BE SPENDING MONEY. NOW IT SEEMS TO ME TO MAKE SENSE TO MARRY THOSE TWO POINTS, THE SUPPLY OF MONEY IN THE RESERVES AND THE DEMANDS FOR MORE EXPENDITURE, AND TO DRAW ON THE RESERVES TO DO THOSE PROJECTS. INDEED, I WAS CRITICISED LAST YEAR FOR BEING TOO CONSERVATIVE IN AIMING FOR $71 BILLION IN 1996-97. SO I KNEW I WOULD BE CRITICISED EVEN MORE HARSHLY IF I SIMPLY PILED UP THE MONEY AND DIDN'T SPEND IT, AND WE ARE TALKING ABOUT RATHER LARGE SUMS OF MONEY.
AND AS I SAID, IT IS A SORT OF ACCOUNTING FACT THAT UNFORTUNATELY, I CAN ONLY DRAW ON THE RESERVES BY RUNNING A DEFICIT. I HOPE IT IS UNDERSTANDABLE. BUT IF YOU HAVE A SUM OF MONEY WHICH IS AT THE BEGINNING OF THE YEAR, SAY 100 BILLION, AND YOU HAVE REVENUE COMING IN WHICH MEETS EXPENDITURE OR EXCEEDS IT, THAT IS A SURPLUS BUDGET, THEN OF COURSE THE RESERVES ARE UNTOUCHED.
SO THE ONLY WAY YOU CAN DRAW ON IT IS TO RUN A DEFICIT. IN OTHER WORDS, EXPENDITURE EXCEEDS REVENUE IN A PARTICULAR YEAR, THEN YOU ARE RUNNING A DEFICIT. THAT IS ALL IT IS. AND WE HAVE PLANNED IT SO THAT WE MERELY HAVE A FEW YEARS OF THESE TEMPORARY DEFICITS AND THEN WE VERY HAPPILY GO BACK INTO EITHER LEVEL BUDGETS OR EVEN SURPLUS BUDGETS, THAT IS ENTIRELY UP TO THE SAR GOVERNMENT. THAT'S WHAT WE'RE DOING. WE ARE OF COURSE A RATHER UNUSUAL GOVERNMENT IN EVER HAVING SURPLUS BUDGETS, BUT THEN THAT IS ANOTHER PROBLEM.
QUESTION:
YOU
[ WANT TO ASK ABOUT BONDS, MR MACLEOD. ANNOUNCED TWO SMALL MEASURES TO HELP THAT MARKET DEVELOP BUT DID NOT SAY ANYTHING ABOUT EXTENDING THE TAX HOLIDAY FOR BONDS ISSUED BY MULTI-LATERAL LENDING INSTITUTIONS TO OTHER BONDS. HAVE YOU GIVEN THIS ANY FURTHER CONSIDERATION?
FS:
WE HAVE GIVEN IT CONSIDERATION BUT THE ABSENCE OF ANYTHING IN THE BUDGET SIGNIFIES THAT WE HAVEN'T REACHED A CONCLUSION ON IT, I'M AFRAID. WE PRESENTLY GIVE CONCESSIONS TO PEOPLE LIKE ADB AND WORLD BANK, BUT YOU'RE RIGHT THAT THERE ARE OTHER PROPOSALS FOR SUCH TREATMENT, BUT I DON'T THINK WE'VE GOT ANY CONCLUSION ON THAT, CERTAINLY NOT ONE T COULD ANNOUNCE IN THE BUDGET.
/QUESTION
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