CO129-561-10 Estimates 1938 2-9-1937 - 23-9-1938 — Page 38

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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