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RESTRICTED Report No EMA-23a This report was prepared for use within the Bank and its affiliated organizations They do not accept responsibility for its accuracy or completeness The report may not be published nor may it be quoted as representing their views INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION MEMORANDUM ON THE ECONOMIC SITUATION OF IRELAND July 2 1970 Europe Middle East and North Africa Department Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized

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Page 1: INTERNATIONAL BANK FOR RECONSTRUCTION · PDF fileKC_t_U_8T8 'Budge taIa ... (relions of USp)u Toa et ;ustanding; Lieo. 31, IYOU 216.2 Not of ... spite of a revision of subsidy rates

RESTRICTED

Report No EMA-23a

This report was prepared for use within the Bank and its affiliated organizationsThey do not accept responsibility for its accuracy or completeness The report maynot be published nor may it be quoted as representing their views

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL DEVELOPMENT ASSOCIATION

MEMORANDUM ON

THE ECONOMIC SITUATION

OF

IRELAND

July 2 1970

Europe Middle East and

North Africa Department

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CUR RINCY EUIV.LRNTS

1 'Irish pound 2.40 U.S. dollars

1 U.S. dol3ar 8 shillings and fouvpence (8/4)or 0.42 Irish pounds

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TABLE OF CONTENTS

Basic Data i

Summary and conclusions ii

I. Introduction 1II. Social developments 1

III. Madro economic trends 2

National income and expenditure 2Balance of payments 3Public finance 4Prices 7

IV. Development planning 7V. Major sectors of the-economy 9

Agriculture 9Industry 11Tourism 13Transportation 14Public utilities 15Education 16

VI. Prospects 16

Statistical Tables

Table 2.1 Origin and use of GNPTable .3.1 Balance of paymentsTable 3.2 Caposition of importsTable 4.1 External debt outstandingTable 4.2 Service payments on external debtTable 5.1 Summary of budget operationsTable 5.2 Public sector capital program and its financingTable 7.1 Value and composition of agricultural output

This memorandum was prepared by Gerrit M. de Wit, who visited Irelandin December 1969.

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I

BASIC DATA

Area 27100 square miles

Population (1969) 2.9 millionRate of growth 1949-61Rate of growth 1962-69 0.4%Denaity (per square mile) 106

Political status Republic

Gross natiL pout(98t:! Brdc £?8 1,272 millionAWL rat f growth (9yb68) 3.4%

Real rate of grawLh (1968) 5.4%Per capita GNP,(1968) t439 ($1,052)

Net domestic product at,factor cost (1968)of which, in percent:

Agriculture, forestry and fishing 20.5ndustry 33.8

Distribution, transportation and communication 17.4Public administration and defense 6.4Other 21.9

Percent of MNP at market prices (1968)fress investment 21.6Gross national savings 19.9Private consumption 6.1

Money and Credit Annual rate of increaseOctober 1969 1964-1968

(ROilons o7lC)Money supply 372.8 6.3%Claims on private sector 455.0 ll.%Claims on public sector, net 166.0 33.4%

Rate of increase In 1968-1969 1963-1968Consumer price-index d.h%~ (A z.-Auz-) 4.6%Wakkir earnings 11.5% (June-June) 8.3%

Gover2ment finance (millions of l)lKC_t_U_8T8 'Budge taIa

Current expenditurea 353.8 392.9Current revenue a345.5 392.9Dafteit or surplus -8.3Capital progamt 2141..6 166.8

Externa blic dett (relions of USp)uToa et ;ustanding; Lieo. 31, IYOU 216.2

Not of undisburned 167.6Nv coimit1onta obtained during 1969 165.14Total annual debt servi.ce, 1968 17.9Debt service ratio 1.5% of exports of goods and net services

Balance or payments (millions of 9) Estimate

Exprt2 of goods, f.o.b.IAportn of goods, c.i.f. ir85 59

1ad9 deficit -166 -220Ba2mance on services 1h14 160Clance on goods and services -22 -60

Comodity ioncentration of exports 1968(% of to=taexports)

Lie animals 17Ceat and meat preparations 18Other food8

Total food 1

Notforignexcana reervs (4)grj r 1 , 96) f276 million (6 months imports~of goods)

r position (millions of US$) Deceber. 31, 1969

QUOU 80not drawings/Fund sales ( 1, -38

IewM loa nt - 1969 Power o14.b million

Central dovernmnt onlyDbtire pubic aector1 includes local Governxents and State enterprises

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SUMMARY AND CONCLUSIONS

i. Recovery from the 1966/67 recession accelerated in 1968; GNP in-creased by 5-6 percent in real terms. Growth in 1969 was somewhat lowerlargely due to industrial strikes; nevertheless real growth in GNP amountedto 4 percent. Important production gains have been made in industry butagriculture has not expanded much. The high level of activity has causedupward pressure on wages causing substantial price rises. The Governmentis trying to limit wage increases for 1970 to 7 percent by ensuring throughprice controls that additional pay rises are not passed on to consumers.

ii. Imports of capital goods contributed substantially to the externalpayments deficit, which rose from 622 million in 1968 to 760 million in1969. These have to a large extent been offset by foreign borrowing. Netforeign exchange reserves, as a result, have not diminished much and stillamount to about 6300 million.

iii. The Government in 1969 adopted the Third Program for Economic andSocial Development (1969-1972), which has as objectives, reduction ofunemployment and emigration through promotion of industry and tourism,rationalization of agriculture, and support of farm incomes. The plan hasan indicative nature. The absence of an investment program impairs itsusefulness somewhat and makes it difficult to assess the country's invest-ment needs and the Government's capital requirements. Public investmentcapital is likely to become scarcer while prospects for borrowing in foreigncapital market remain uncertain.

iv. Government current expenditure increased by 15 percent in 1968and 10 percent in 1969. Expenditure for agriculture (mostly consisting ofsubsidies) has expanded at about the same rate and is expected to amountto 185 million or 22 percent of current outlays in this fiscal year. Inspite of a revision of subsidy rates for creamery milk and the inception ofa beef cattle incentive scheme no reduction of the subsidy burden is insight.

v. The Government has shown its willingness to take correctiveactions, if needed, where prices and external payments are concerned.It may nevertheless be difficult to break out of the present wage/pricespiral. Prolonged disruptive conditions resulting from present develop-ments in this field are, however, unlikely, although they could causesome erosion of Ireland's international competitive position. Externaldebt amounted to about L143 million at the end of 1969. With borrowingof h25-30 million per year, debt service in 1975 should not exceed 5percent of exports of goods and net services.

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I. INTRODUCTION

1. The most recent economic report, circulated to the ExecutiveDirectors, is "Current Economic Position and Prospects of Ireland" (EMA-2),dated November 29, 1968. This memorandum reviews developments in theeconomy since the middle of 1968.

II. SOCIAL DEVELOPMENTS

2. Population (which had been declining until 1961 and has sincebeen expanding) continues to grow at about 0.4 percent per year., Thisreflects the continued drop in emigration, which at present amounts toabout 12,000 persons per year, as compared with 16,000 per year in theearly sixties and 42,000 per year during 1956-61. Emigration is mostlyto the United Kingdom, where Irish citizens have full rights with respectto voting, voluntary.military service, Government employment, social ser-vices and the like. About 80 percent of emigrating labor is unskilled.

3. Employment in industry and construction increased by 12,900 in1968 and in services by 4,000 from April 1968 to April 1969. As a resultof a movement away from rural areas, employment in agriculture decreasedby some 12,000. On balance the active labor force has not expandednoticeably and still hovers around 1.1 million. Registered unemploymentcontinues to vary between 5.5-6.0 percent of the labor force. However,unemployment is actually higher. Recent surveys suggest that many peoplein rural areas, particularly the young who are not employed and not regis-tered as unemployed, would take up employment if opportunities were locallyavailable. A major problem the Government faces in this respect is the lackof labor mobility. In spite of several incentives, people are reluctant tomove to industrial areas other than Dublin or Britain. A social securityscheme that provides payments to redundant workers contributes to this.Another important factor is the shortage of low-cost housing prevailingthroughout the country. A considerable shortage of skilled labor hasemerged. There is also a shortage of female labor in certain urban areas.

4. Over 50 percent of the employed labor force is organized in tradeunions, which are becoming increasingly active. The system of country-wideuniform wage increases, agreed between unions and employers' organizations,has gradually been abandoned and instead industry-by-industry negotiationshave taken their place. In spring 1969, after a serious strike, a 20 per-cent wage increase over 18 months ending June 1970 was granted to mainte-nance craftsmen in various occupations throughout the country. Initiallythis settlement caused pressure to revise unexpired wage contracts in thelight of this agreement; with a few exceptions this could be avoided.

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However, as a result of the maintenance wage agreement, the expectationof the empl6yed with respect to future wage increases are high. Manyagreements expire in 1970 and the maintenance settlement is bound to be animportant factor in the forthcoming negotiations. The Government hasannounced its intention to limit wage increases to 7 percent during 1970by ensuring through extensive price controls that additional pay rises arenot passed on to consumers. The labor unions, however,;refuse to cooperateif the restrictions do not apply to other incomes as well.

5. During 1968, industrial wages increased at about the same rateas productivity but in the first half of 1969, wages started to risefaster than productivity (see paragraph 15). If the Government's effortto curtail income increases fail, this trend might accelerate, possiblyweakening Ireland's internationalVcompetitive position.

III. MACRO ECONOMIC TRENDS

National Income and Expenditure

6. The recovery from the 1965/66 recession'/ accelerated in 1968;real GNP in that year increased by 5-6 percent (1967: 4 percent). It isestimated that during 1969 GNP in real terms increased by about 4 percent(see table 2.1). Industrial output gained 11 percent in 1968; as a resultof strikes in early 1969 the rate of growth slowed down temporarily., butfor the year as a whole industrial production is expected to have increasedby over 8 percent. Construction is booming and a production increase of9-10 percent was realized in 1969, probably somewhat more than in 1968.Agricultural production increased by 5 percent in 1968, but output stagnatedin '1969 (see paragraph 18). Output of the service sectors increased on theaverage by some 5 percent during both 1968 and 1969.

7. The expansion of the economy was accompanied by a buoyant demand,particularly for capital goods. While during 1969 consumption in constantprices increased at approximately the same rate as real GNP (3.9 percent),investment in constant prices increased by an estimated 15.2 percent.2!

1/ In 1965 the Government instituted tax increases and credit restric-tions to curtail rapidly rising expenditure on both consumption andinvestment goods, causing pressure on the balance of payments. Asa result the economy stagnated. When the improved external paymentsposition allowed a relaxation of the restrictive measures late 1966,the economy revived.

2/ As a result, investments increased from 22.7 percent of GNP in 1968to 25.1 percent in 1969.

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Savings did not keep up with such a rapid rise of investment expenditureand the increase (to a large extent caused by the acquisition of shipsand aircraft) had to be financed for over 50 percent by external capital.Nevertheless, savings as a percentage of GNP have tended to increase inrecent years; in 1969 they amounted to 12.9 percent of GNP as against 10.5,12.3 and 12.8 percent in 1966, 1967 and 1968 respectively. Recent develop-ments in investments and financing are summarized in the table below(millions of pounds; current prices):

1/1966 1967 1968 1969-

Gross domestic fixed capitalformation 195 215 256 315

Changes in stocks 9 -6 19 26

Total capital formation 204 209 275 341

Financed by:

National savings 112 141 163 183

Depreciation allowances 76 83 90 100

Foreign capital and changesin foreign exchange reserves 16 -15 22 58

204 209 275 341

Source: Department of Finance.

Balance of Payments

8. Following the institution of tax increases and credit restrictionsin 1965, the trade deficit decreased during 1966 and 1967, but it increasedagain by 159 million in 1968 and L54 million during 1969 (see table 3.1 and3.2). The trade deficit during 1969 reached 16220 million equivalent toalmost 60 percent of exports or 37 percent of imports. Most of the increaseis due to imports of capital goods, which rose by 114 million in 1968 andby L30 million in the first three quarters of 1969. Apart from this, in-creased imports of materials for current production representing raw materialneeds of new industries, have contributed substantially to the deficit;this concerns lumber, textile fibres and yarn, crude petroleum, fertilizers,chemicals, plastics, and steel products. Imports of consumption goods.pickedup sharply as soon as the restrictive credit and fiscal measures of 1965had been relaxed. However, consumption imports did not play a major rolein increasing the trade deficit in 1969. Partial data (see table 3.2)

1/ Provisional estimates.

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indicate that additional imports of capital goods accounted for 40 percent,of raw materials for 38 percent and of consumption goods for 22 percent

of the increase in the 1969 trade deficit. On the export side restrictionsimposed by the United Kingdom during 1969 (import deposits) made exports

(particularly of beef and livestock) more difficult. Prospects are for an

improvement in this respect.

9. The rise in the trade deficit was partially offset by an increase

in the export of services (L21 million in 1968 and bl6 million in 1969).

Tourism earned L97 million in 1969 representing an increase of L4 millionover 1968; a further increase of L6 million in tourist revenue is envisaged

for 1970. Foreign exchange earnings attributable to Shannon Free Airport

Industrial Estate are rising rapidly. In 1969, its net exports amountedto L20 million; this represents an increase of L4 million in 1968 and of

L5 million in 1969. Apart from these two items, the increase of invisibles

comes from a variety of sources, such as emigrant remittances, agents'

commissions, transportation etc.

10. In total, the current account surplus of U15.2 million in 1967changed to a deficit of L22.2 million in 1968 which increased further to

L60 million in 1969. The 1968 deficit has largely been financed by private

capital inflow. The public sector registered a net outflow of capital. No

comprehensive data are as yet available about the financing of the deficit

in 1969. The Government has obtained commitments to the amount of ; 57 mil-lion in 1969 and the greater part of this was disbursed in that year. Thisand substantial capital inflow through branches of foreign banks have pre-

sumably been the main source that financed the 1969 deficit.

Public Finance

11. It is the policy of the Government to match current expenditure

with current revenue. As a result there have been only small deficits,which nevertheless reached an all time high of L8.3 million (or 2.4 percent

of current expenditure) in 1968/69 (see table 5.1). No current deficit for

1969/70 was budgeted; although current expenditure has exceeded budget esti-

mates the excess will probably be offset by an unbudgeted 1/ increase in tax

revenues, due to the high level of economic activity and rising prices.

Outlays for agriculture, which to a large extent are composed of a milk

subsidy to dairy farmers (see paragraph 20), have been rising as fast as

other categories. Education expenditure is increasing rapidly because of

the upward pressure on salaries, the extension of school bus service and

provision of State assistance to secondary schools. Social welfare payments

(mainly social insurance, non-contributory old age pensions and children's

allowances) have been rising moderately. Health expenditure may become a

major burden on the current budget. The country is experiencing a sharp

increase in the cost of medical care and the Government has promised to

assume further cost increases.

1/ Tax revenue has in the past been underestimated in the budget by

about 10 percent.

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12. Current expenditure of the Government includes various kinds of

grants to Local Authorities (1968/69: 157.7 million or about 17 percentof current expenditure). These plus local taxes cover current expenditureof Local Authorities. During 1968/69 current expenditure of Local Authori-ties amounted to L116.7 million; for the current year they are estimatedat 6131.1 million. The largest single item of current expenditure of LocalAuthorities is health care (1968/69: 42 percent); these have been risingfaster than total outlays and future increases are likely to be mostlycovered by additional Government grants. An important item in localcurrent expenditure is road maintenance, which has also been increasingsteadily (see paragraph 30).

13. Capital expenditure of the public sector increased by L31.2 million(plus 28 percent) to h141.6 million in 1968/69; its share in total expen-diture rose from 24 to 26 percent. A further increase by L24.8 million(18 percent) is anticipated for the current year. All capital expendituresare financed from non-current revenue. Nevertheless, some savings arerealized from current revenues, as the current budget does cover the admin-istrative expenditure associated with capital projects as well as debtservice and payments to the Road Fund. No estimates of the first areavailable but the principal repayment component of debt service amountedto L26.0 million in 1968/69 and about L6.5 million worth of constructionworks was financed out of the Road Fund, so that public sector savings lastyear amounted to at least 1632.5 million or 8 percent of total current expen-diture. For the current year, public sector savings thus defined shouldamount to some L36 million, also equal to 8 percent of current expenditure.A summary of public spending is given below (millions of pounds):

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Budget1966/67 1967/68 1968/69 196970

Government:- Current expenditure 272.1 305.6 353.8 392.9- Grants to Local

Authorities 46.7 52.6 57.7 65.9Direct current expenditure 225.4 253.0 296.1 327.0

Local Authorities currentexpenditure:

- Roads 18.3 19.0 20.5 23.1- Health 38.7 42.8 48.5 53.8- Other 38.5 42.1 47.7 54.2

Total 94.5 103.9 116.7 131.1

Entire public sector:- Current expenditure 319.9 356.9 412.8 458.1- Capital expenditure 97.6 110.4 141.6 166.8

Total 417.5 467.3 554.4 624.9

Current expenditure -

Current revenue as % of GNP 30% 31% 32% 32%

14. Because of the heavy reliance on borrowed funds to finance capitalexpenditure,the Government has built up a substantial amount of public debt.Internal debt, held by the public amounted to 6859 million (or 30 months of1968/69 current revenues) on March 31, 1969; debt servicel/ on this isexpected to increase from L89 million in the current year to 1696 millionin 1972/73. In addition 16167 million (or 6 months of 1968/69 current reve-nues) in loans from the Associated Banks was outstanding as of September 30,1969. External debt outstanding as of December 31, 1968, amounted to theequivalent of L90.1 million ($216.2 million2/); net of undisbursed it amount-ted to 1669.8 million ($167.6 million). During 1969 long-term external loanswere arranged or guaranteed by the Government to the equivalent of 658 million($138 million). As a result, external public debt outstanding as of Decem-,ber 31, 1969 should amount to some L143 million ($343 million). Debt ser-vice on external loans contracted so far will amount to about L16 million($:38 million) by 1975. This is about 3 percent of estimated 1969 foreignexchange earnings from exports of goods and net services.

1/ Includes interest subsidies on debt (particularly for housing) con-tracted by other public entities.

21/ Source: Statistical Services Division; Economics Department.

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Prices

15. Price rises became generally noticeable in late 1968; indiceshave increased as follows:

Consumer Food Wholesale

price price/1 priceindex index- index

average 1966 - average 1967 3.2% 1.9% 2.6%

average 1967 - average 1968 4.7% 5.7% 6.0%

August 1968 - August 1969 8.4% 6.7% 8.0%--2

/1 Component of consumer price index.T2 June 1968 - June 1969

Source: Irish Statistical Bulletin, June 1969;Economic Series, October 1969.

Price rises are the 'result of a large increase in demand, due to the invest-ment boom and generally buoyant economic conditions. The resulting demandfor scarce skilled labor has created a strong upward pressure on wages.Wage increases have generally exceeded productivity gains. In industry,production volume during the second quarter of 1969 was 10.9 percent higherthan during the same period of 1968, while the number of persons employedin industry increased by 6.1 percent. Although there was thus an increaseof 4.5 percent in productivity, wage costs per employee increased by over13.4 percent in the same period, causing unit wages to rise by 8.5 percent.The Government is trying to curtail further price increases through pricecontrols, which, it hopes, will have the dual effect of restraining wagedemands on the part of labor and providing a disincentive to employers togrant increases which they cannot pass on to the consumer.

IV. DEVELOPMENT PLANNING

16. In 1969 the Government adopted and Parliament approved the ThirdProgram for Economic and Social Development, 1969-1972. The plan outlinesGovernment development objectives, the most important of which are:

1. Reduction of unemployment and emigration, particularlythrough the promotion of industry and tourism by meansof financial incentives, the improvement of education,and other measures.

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2. Rationalization of agriculture, while ensuring that farmerswho work their land fully and efficiently share equitablyin the growing national prosperity, maintaining a reasonablerelationship between farm incomes and incomes.in other occu-pations, and aiding the smaller and economically more vulne-rable farmer to secure an acceptable level of'income.

The plan also gives projections of the main economic aggregates: growth inreal terms during the plan period is projected at 4.0 percent p.a. for totalGNP, 2.0 percent p.a. for agriculture, 6.5 percent p.a. for industry and3.3 percent p.a. for other sectors. The projections for the public capitalprogram are as follows (millions of pounds; 1968 prices):

actual budget projections1968/69 1969/70 1972/73

Housing, sanitary services,education and health 46.5 48.0 56.5

Other building and construction 5.3 5.7 7.5

Agriculture, forestry andfisheries 24.2 23.8 28.5

Industry and tourism 21.0 25.9 33.5

Fuel, power and tele-communications 26.5 27.4 27.5

Transport companies 17.3 32.7 11.5

Total 140.8 163.5 165.0

These figures suggest that the Government does not intend to increase itsinvestment activity significantly over its present level. The plan pointsto the extraordinarily high expenditure of transport companies in 1969/70and says that the projections represent an increase of 5.6 percent per yearif transportation is excluded. Even so, current expenditure of the publicsector is projected to increase by 5.8 percent per year during 1968/69 to1972/73 while during the same period the public capital program is scheduledto increase by 4.0 percent per year.

17. The plan has an indicative nature and (apart from the statementof Government objectives) does not provide a basis for action at the sectoror project level. Projections are made for broad economic aggregates onlyand no estimates for intermediate years until 1972 are given. Moreover, theplan does not provide a detailed review of the country's investment needs.It projects total investments to grow from b261 million in 1968 to E340 mil-lion (1968 prices) in 1972. Based on these figures it estimates foreign

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borrowing requirements (in terms of disbursements) of both the public andthe private sector in 1972 at L32 million at 1968 prices (1968: h20 million).

18. The Government has not yet decided on a regional developmentstrategy. In October 1966, consultants Colin Buchanan and Partners werecommissioned by UNDP on behalf of the Government to make recommendationsconcerning physical development policies for underdeveloped areas. Areport was submitted in October 1968, recommending that emphasis should beput on developing two major new industrial areas at Cork and Limerick-Shannon while giving secondary priority to six other growth centers, scat-tered throughout the country. This concept has been challenged by somerepresentatives of Government and Parliament who fear neglect of ruralareas. No concensus has been reached on the subject. Because of itsimplications for the development of education, transport facilities andother infrastructure, a decision is needed to facilitate planning in thesesectors.

V. MAJOR SECTORS OF THE ECONOMY

Agriculture

19. During 1968 the volume of output increased by 5.5 percentparticularly as a result of a good demand for cattle and pigs, the in-creased acreage under wheat and favorable weather conditions. The expec-tation for 1969 is that agricultural output increased less, if at all,because of a reduction in exports of cattle (minus 10 percent during thefirst nine months),.a reduction in the area under crops (minus 3.3 percent)and a prolonged period of drought which depressed milk yields somewhat.Agricultural production is for the greater part composed of livestock andlivestock products (see table 7.1). A large part of production is exported.The export value of agricultural commodities in 1968 was U154.4 million or(uncorrected for trade margins) 52 percent of production value. Althoughagricultural exports have increased by 7 percent per year in recent years,their share in total exports have gradually come down from 63 percent inthe early sixties to 50 percent in 1968. The largest single productionand export item is beef cattle; in 1968 production was 1,384,000 head ofwhich 78 percent was exported (mainly to Britain), 17 percent consumeddomestically and 5 percent added to the herd.

20. Agriculture contributes about 19 percent to national income andemploys 31 percent of the labor force. More than half the farms are smallerthan 40 acres, which is the minimum farm size that is profitable under Irishconditions, according to the Department of Agriculture. The small farm sizemakes farmers financially weak and inefficient with the result that they haveto be supported by the Government. There are a great number of subsidy andincentive schemes, the cost of which has risen sharply as follows (millionsof pounds):

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1965/66: 43 1967/68: 60 1969/70 estimate: 74

1966/67: 46 1968/69: 68

The largest single component of Government expenditure for agriculture isthe milk subsidy; it applies to milk delivered to creameries for processing,not to milk for liquid consumption. Initiated on June 1, 1962 at 1 pennyper gallon, its cost has been boosted from L3 million in 1962/63 to overh30 million in the current fiscal year by both increases in milk productionl!and in subsidy rates (present average rate 8 pence per gallon 2/). The milksubsidy has become an obstacle to agricultural development in that it fore-stalls the voluntary switch by farmers from dairying to4other branches ofagriculture. Figures on herd size suggest that the subsidy has been anincentive to increase the number of milk cows while curtailing growth inthe number of beef cattle and pigs and actually depleting the number ofsheep and lambs; the production of beef, pigs, sheep and lambs are profita-ble without extensive subsidy.

Livestock numbers as of June 1 (thousands)

1962 1965 1968 1969

Milk cows 1,309 1,547 1,607 1,655

Other cattle 3,433 3,812 3,964 4,017

Sheep 4,671 5,014 4,077 3,989

Pigs 1,111 1,266 1,063 1,109

21. In an effort to change present trends the Government has adoptedtwo measures. First, it has started on April 1, 1969 the Beef CattleIncentive Scheme, which gives under certain conditions U12 per head ofcattle to farmers not engaged in commercial milk production. The schemehas had good response; participation for the current year is expected to bethe equivalent of 180,000 head of cattle at a cost to the Government of62.2 million. Second, as of September 1, 1969 the Government has revised

1/ Deliveries to creameries 1962: 324 million gallons1968: 520 million gallons

2/ In addition there is a subsidy to the Milk Board which exports creameryproducts. This subsidy is included in the milk subsidy cost mentionedthroughout this paper.

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the milk subsidy rates; generally the rates have been increased for the

smaller farmers and decreased for the larger ones.1/ This has increasedthe cost to the Government by U million during 1969/70. However, thesetwo measures should not be expected to provide relief of the growing subsi-dy burden. Actually they may well further increase it for the followingreasons:

(a) In addition to the cost due to the increase in averagerates, the Government now also has to bear the cost ofthe Beef Cattle Incentive Scheme, which could assumemajor proportions in due course. It is likely that anumber of farmers who never engaged in milk productionwill now receive a subsidy.

(b) There is still ample potential in smaller farms (less than20,000 gallon) to expand production and receive the oldsubsidy rates or revised higher ones. If all these farmerswould increase their production to 20,000 gallons, thiswould provide an additional 1,660 million gallons over thepresent (1968) 520 million gallons of creamery milk.

It would therefore seem that another strategy is required to provide reliefof the subsidy burden. The small farm size is a major obstacle to a switchto other types of agriculture. Production of beef cattle in particular willgenerally require larger farms than commonly prevalent in Ireland. Ideally,the Government should devise a long-term development plan for agriculture,including detailed projects and policy measures, which, while rationalizingagriculture, would assure an adequate income for the present generation offarmers.

22. There are no major agricultural capital projects going on at themoment nor are any envisaged for the future. Capital for agriculturalcredit is very scarce; a livestock project to be submitted to the Bank mayhave the provision of funds to the Agricultural Credit Company as its mostimportant feature. A project exists for the development of the fishingindustry through the extension of harbor facilities and modernization ofthe fleet at a cost of up to $26 million.

Industry

23. The Government continues to place emphasis on industrial develop-

ment to reduce unemployment and to provide job opportunities to redundantagricultural workers. To that end it is increasing its capital expenditurefor industry as follows:

1/ Of 1968 deliveries 57 percent would have received a higher subsidyunder the new rates, 30 percent would have received the same paymentfor high quality milk or 14 percent less than before for lower grademilk and 13 percent would have experienced an unconditional reduction.

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of which:Capital

Total grants

1967/68 69.8 million I67.1 million

1968/69 L14.1 million b9.5 million

budget 1969/70 18.7 million 1l2.0 million

The annual rate of growth of industrial output (in real terms) was about7 percent until 1967; it accelerated to 11 percent in 1968 and 8 percent(somewhat lower as a result of strikes) in 1969. Gross'output should havereached about 1940 million (contributing 25 percent to GNP) in 1969. Indus-trial exports (at current prices) have increased on average by 16 percentper year until 1967, and by 30 percent in 1968, reaching 1150 million orabout 50 percent of total exports in that year. For 1969 the rise isestimated at 20 percent. Direct employment in industry has increased by3,500 in 1968 and an estimated 12,000 in 1969. During 1964-1967, theaverage annual increase amounted to 2,300 (about 1.3 percent of the laborforce in industry).

24. The Government has revised its system of assistance to industry.The Industrial Development Bill 1969, provides for the following incentives:

a. grants for the establishment of new industries

b. grants for the re-equipment of existing industries

c. grants towards fixed assets leased by industry

d. training grants

e. grants towards interest payable on loans raised for

the purchase of fixed assets

f. grants for research and development

g. guarantees of loans raised for the purchase of fixed assets

Grants for the purposes listed under a. to d. could already be given underthe previous legislation. An important change is, however, that themaximum grant for new industries has been set at 60 percent of the purchaseprice of fixed assets instead of the previous two-thirds. The possibility-of giving grants for purposes e. to f. have been added. Two other importantchanges are that An Foras Tionscal (Grant Board) has been abolished andthat the total amount of grants authorized under present and previous legis-.lation has been fixed at b100 million, half of which had already been spentbefore the enactment of the new bill. It is the policy of the Industrial

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Development Authority (now completely in charge of industrial development)

to give only grants to industries that work almost exclusively for export,so as to avoid disturbance of the domestic market. Moreover, industriesthat are established in depressed areas, qualify for a substantially highergrant than those in other regions. The same criteria for both domesticand foreign firms are observed.

25. The Government has also extended the period of tax exemptionof profits made on exports for newly established firms. The period offull exemption has been extended until 1985; the additional period ofpartial relief (averaging 50 percent) now runs from 1985 to 1990.

26. The Industrial Credit Company is experiencing a rising'demand for

credit; it anticipates an increase in disbursements from -4.2 million in1968 to 113.4 million in 1974. For this it will have to borrow aboutL5.5-6.0 million per year; the Government has requested a Bank loan tocover part of this.

Tourism

27. The number of foreign visitorsl/ increased by 378,000 (2.2 per-cent) to 17.3 million during 1968 (1967: about 300,000). Expenditureincreased by L6.8 million or 10 percent to L75.72/ million in 1968 (1967:plus mh5.2 million or 8 percent). In spite of the civil disturbances inNorthern Ireland the number of visitors from the U.S. rose considerablyduring 19693/; the number of visitors from Britain and other Europeancountries3/ increased also. The visitors for one day from Northern Irelandremain an important category; during 1968 foreign exchange earnings fromthis source were estimated at E13.6 million (18 percent of total), surpassedonly by expenditures of British (1331.5 million) and U.S. (L14.8 million)visitors. Even though the number of one-day visits from the north mayhave fallen somewhat, total foreign exchange earnings arising from foreigntravel is expected to have increased again by L4 million during 1969.

1/ Tourists in 1968 made up 72 percent of foreign visitors; the remaindercame for business purposes, visit of relatives, etc.

2/ Excludes earnings by Irish transportation companies, which in 1968amounted to 17.3 million.

3/ Figures for the first 8 months show an increase of 26 percent in thenumber of visitors from the U.S. and of 9 percent in those fromBritain and the rest of Europe.

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28. Revenue from foreign travel covers an important part of thetrade deficit (average 1967/68: 53 percent). The Government, realizing theimportance of tourism, is assisting the industry by means of grants for theconstruction or remodelling of accommodation and resort development. Inaddition the Tourist Board can guarantee loans and/or give a subsidy towardsinterest. Tax concessions consist of accelerated amortization and reductionof local taxes. During 1968/69 hl.2 million was spent on grants fortourist accommodation; the U1.5 million allocation for 1969/70 had alreadybeen committed last December and an additional LO.5 million was appropriatedby Parliament. Other capital outlays for tourism amounted to 10.9 millionduring 1968/69 and is budgeted at L0.7 million for the current fiscal year.This does not include capital expenditure relating to aircraft, touristicroads, etc. (see paragraphs 30 and 31). Interest subsidies amounted toL550,000 in 1968/69; for 1969/70 4500,000 has been allocated in the currentbudget.

29. The Tourist Board wants to create a credit institution, specializ-ing in tourism. It says that credit available from commercial banks (atpresent only marginally sufficient) will dry up if the present credit squeezecontinues. Moreover, the terms of commercial bank credit are ill suited tothe tourist industry's needs. Although there have been discussions withprivate banks, no detailed proposals have as yet been made.

Transportation

30. There have been no major developments with respect to roads.Construction, improvement, and maintenance of roads remain the responsi-bility of local authorities. In 1968/69, these spent an estimated 620.5million on roads, L10.0 million of which was provided by the Governmentfrom the Road Fund. A number of deficiencies in the road system (bothwith respect to the organizational set-up and its physical condition) isbecoming apparent. Organizationally, the emphasis is too much on localroads. In 1968 expenditure was as follows:

Maintenance and improvement local roads 113.9 million (68%)

Maintenance main roads h 2.2 million (11%)

Improvement main roads b 1.8 million ( 9%)

Construction national primary roads b 2.5 million (12%)

.h20.5 million (100%)

Local roads include a great number of "touristic" roads in depressed areas,which are maintained largely to provide employment to the local population.As a result of this policy, the Irish now claim to have the highest per

capita mileage of paved roads in the world. The most important reason ofthe distortion of road expenditure is that a major part of resources availa-ble for this purpose remains outside the jurisdiction of a central road

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planning agency. With respect to the physical condition of the road network,there are deficiencies in capacity and pavement in more densely populatedareas. The Dublin area needs a beltway costing 13 million and thereare projects for 1335 million worth of other urban roads outside Dublin;funds for these do not seem to be forthcoming.

31. Investment requirements in air transport facilities are consider-able. Planned investments in Shannon and Dublin airports during 1969/70 -1973/74 amount to L21.4 million (L17.2 million for construction of buildings,runway works, aprons etc; 12.7 million for navigational aids and i1.5 mil-lion for land acquisition). A capital program (ending March 1973) of 71million for the purchase of aircraftl/ and supporting equipment is underway;about L29 million is provided by the companies from internal funds, theGovernment participates with L10 million share and 15 million loan capital,and 1,21 million in external loans have been arranged by the companies witha Government guarantee (see paragraph 14).

32. C.I.E. (the national road and rail transport company) has submittedto the Government a capital program covering 1969/70 - 1973/74 of L24.5million to be financed by L9 million of Exchequer funds and the remainderfrom C.I.E.'s internal funds. The Government has not yet approved theprogram. The two Government-owned shipping companies are planning shippurchases involving expenditure of L3-5 million per year during 1970/71and 1972/73; no Government approval has as yet been obtained. The costof improving harbors is estimated at hl-2 million per year, subject toGovernment approval.

Public Utilities

33. Water supply and sewerage need improvement, particularly in somedepressed regions where the development of industry and tourism depend onthem. Identified projects in this field have an estimated cost of L23.3million, (most of it in the Dublin area) to be financed from Governmentresources. The rate of execution will be dependent on the availabilityof funds.

34. Demand for telephone service is increasing faster than supply;as a result a considerable backlog in service has emerged. Moreover 20percent of the system is not yet automated. Budget allocation for tele-phone service are at present about L8 million per year. A four-yearprogram costing L50 million would be required to improve the system sig-nificantly. Charges for telephone service have recently been raised andgenerate a 7 percent return on capital.

1/ This involves two Boeings 747 and eight Boeings 737.

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35. Power generation increased by 10 and 12 percent in 1968 and 1969respectively. Capacity (at present 1290 MW) is being extended by four plants(three oil, one hydro) totalling 738 MNW. Financing for this has beenarranged. In addition the Electricity Supply Board has proposed to theGovernment a L39.1 million expansion program for the years 1971-1978. Evenwith these extensions, power generating capacity will probably fall shortof demand; possible deficits are expected to be covered by surplus capacityin Northern Ireland. The Electricity Supply Board experiences great diffi-culties in obtaining sufficient long-term capital to finance its expansion;it has already had to resort to some medium-term borrowing.

Education

36. The Government attaches great importance to education. Theextension of educational facilities is intended to provide skilled manpowerto industry, open training possibilities for redundant agricultural workersand reduce emigration by offering new career possibilities at home. TheGovernment has prepared a program for the construction of technical collegesand comprehensive schools (estimated cost 1612.2 million). In addition theextension of vocational and secondary schools is envisaged at a cost of;30 million. Other educational requirements include primary and technicalteacher training institutes and a dental hospital.

VI. PROSPECTS

37. The immediate difficulties the country experiences with respect towage and price developments will probably require early,,Government action.The Government has shown, when similar developments occurred during 1965,that it is willing to take corrective measures. Although, therefore, nolong-term disruptive effects of the present difficulties need to be feared,it is possible that the measures the Government may take will involve cur-tailing public expenditure, which would temporarily put a squeeze on develop-ment finances.

38. There are two other factors which may cause funds for developmentto become relatively scarcer in the years ahead. First, there is uncertaintyabout the course the international capital market will take. The Governmentis nevertheless, confident that it will also in the future be able to borrowlimited amounts externally, particularly in the United Kingdom and inGermany. Secondly, the demand for investment capital is rising rapidly andwill probably continue to do so. In the public.sector, big developmentprojects are being prepared for all sectors of the economy on a scale notexperienced before. Additional capital needs, not at present envisaged,may emerge, during the next few years. As a result, claims (both in numberand amount) on funds available for public investment will probably continue

to rise rapidly. The private sector will also require capital to financeexpansion, particularly in industry. To a large extent this demand has an

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indirect claim on Government funds, through the Industrial Credit Company,the Industrial Development Authority and the Agricultural Credit Company.In borrowing from the banking system (a source of capital extensively usedby the Government in the past), the public and private sector are in directcompetition. Because of these trends, a shortage of development capital(both foreign and domestic) is likely to make itself increasingly felt.

39. A large deficit on the current account of the balance of paymentsis again anticipated for 1970 because of the continued high level of economicactivity, necessitating, in particular, large imports of capital equipment.However, reserves are sufficient to fill a temporary gap in financing thisand the Government can be expected to take effective measures to preventrunaway deficits in external payments. Debt service is unlikely to becomea major burden on the balance of payments. If, on the average, the Govern-ment obtains disbursements on foreign borrowings of 625-30 million er yearl/during 1969-1975, debt service in 1975 would not exceed 640 millionJ/ or 5percent of estimated exports of goods and net services.

40. Although Ireland has a high per capita GNP as compared with mostunderdeveloped countries ($1,052 in 1968), it is confronted with the taskof restructuring and modernizing its economy. Together with the need toreduce the present high rate of unemployment and underemployment, thisrequires a substantial development effort in the coming years. The Govern-ment is experiencing an increasing scarcity of development capital, eventhough it is making full use of its domestic and foreign borrowing potential.In order to permit the country to utilize its development potential as muchas possible, continued Bank lending to Ireland is justified.

1/ No official estimates of future capital requirements of the publicsector are available. The above figures are tentative missionestimates of the order of magnitude of yearly disbursements on externalpublic borrowing which compare with past disbursements as follows:

1964: - 1967: LO.4 million1965: 748.3 million 1968: -1966: L20.1 million

No disbursements figures for 1969 are available. A large proportionof the Government's borrowing in 1968 of 658 million has presumablybeen disbursed in that year. The plan estimates aggregate externalborrowing of the private and the public sector to rise from L20 mil-lion in 1968 to 32 million in 1972 (at 1968 prices). Allowing forprice increases of 7 percent per year and assuming a linear trendbetween these two years, average borrowing during 1969-1972 wouldamount to 135 million at current prices. Assuming furthermore thatthe private sector contracts 05-10 million of this (average borrowingand capital issues of companies during 1966-1968 amounted to h5-6million according to table 3.1), public sector external borrowingwould amount to 625-30 million.

2/ New loans assumed to be repayable in equal installments over 10 yearswith no grace and to carry 9 percent interest.

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able 2.1 tORIGIN AND USE OF GNP(millims of pounds!

at current prices at 1958 prices

1966 1967 1968 196- 1966 1967 1968 19 69L

ORIGIN

Agriculture, forestry and fishing 160 171 193 201Industry 267 288 323 )Distribution, transport and communication 1L2 151 166 )Public administration and defense 54 56 61 )Other domestic (including rent) 184 198 220 )Adjustment for stock appreciation -10 -8 -16 -17Rost of the world 43 46 6 5 60

Net national product at factor cost 840 902 1,005 1,108Depreciation 76 83 go 100

Gross national product at factor cost 916 985 1,095 1,208Taxes 190 210 )Subsidies -43 177 210

Gross national product at market prices 3.063 1,272 IjUB

USES

Private consumption 739 772 854 952 583 592 623 648Government consumption 136 146 165 183 86 91 94 97Gross domestic fixed capital formation 195 215 256 315 156 165 188 215Changes in stocks 9 -6 26 8 -7 10 13

1,079 1,127 1,294 1,476 833 8i 915 973Exports of goods and services 340 383 465 503 296 332 361 389Net factor income from abroad 44 46 58 60 41 [4 42 62

1,463 1,556 1,797 2,039 1,170 1,217 1,318 1,4oImports of goods and services -oo -414 - -621 -373 -)89 4 -497

Gross national product at market prices 1.03 lj1h2 1 272 1 [18 -97 828 _ 907

A Provisional estimates

Source Ministry of Finance

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Tab le 3.1 : BALANCE OF PAYMENTS(millions of pounds)

Estimate1966 1967 1968 1969

Current Account

Imports, c.i.f. -363.6 381.6 484.6 595Exports, f.o.b. 235.1 274.1 318.4 375

Trade deficit -128.7 -107.5 -166.2 -220

Tourism, travel (net) 33.5 38.8 39.4 44Investment income (net) 16.8 18.4 23.4 25Enigrants remittances 14.8 16.3 18.7 19Pensions, etc. 6.5 6.8 7.9 8Miscellaneous 31.3 37.4 44.5 54Unaccounted for - 9.7 .0 10.1 10

Total invisibles 112.6 122.7 144.0 160

Surplus or deficit current account -16.1 15.2 -22.2 -60

Capital Account

Government transactions:International institutions

and foreign Governments 3.0 -6.8 -17.5- borrowing (including semi-state companies) 18.9 5.6 6.6

Private transactions:- purchases and sales of securities (net) -2.0 3.3 -2.7- borrowing and capital issues of companies 5.0 4.4 6.0- life insurance (claims less premiums) -3.0 -3.2 -4.0- direct investments by externs 1.2 8.6 13.3- withdrawal savings in U.K. 0.6 0.6 0.5

Unclassified transactions 21.8 11.7

Total capital transactions . 2.2 .8

Change in Reserves

Central Bank -33.5 3.2 7.3Associated Banks 4.1 -45.5 15.9Non-associated banks - 2.9 -10.7

Total change in reserves -29.4 -32. 12.5

Source: Ministry of Finance

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Table 2.2: COMPOSITION OF IMPORTS AND EXPORTS(millions of pounds, unless otherwise indicated)

Jan.-Sept1966 1967 1968 1968 1969

Imports

Producer's capital goods 57.9 58.8 72.7 52.8 62.9

Consumption goods 84.2 87.9 115.9 81.8 99.0of which: food, drink and tobacco (23.7) (25.0) (29.5) (21.5) (23.8)

other consumption goods (60.5) (62.8) (86.5: (60.2) (75.2)

Materials for further production 219.1 234.5 296.1 216.3 245.0of which: for agriculture (15.2) (17.0) (22.6 (15.3) (14.1)

other (203.9) (217.5) (273.5 (201.0) (230.9)

Unclassified &.4 11.1 11.4

Total imports 372.6 392.3 496.1 359.6 434.5of which from: UK 48% 46% 46% 46% 48%

Northern Ireland 4% 4% % 14% 4%Other EFTA 3% 4% 4% 4% 6%EMD 13% 15% 16% 16% 16%North America 12% 11% 10% 10% 10%Other countries 20% 20% 20% 20% 16%

Exports

Agriculture 122.7 144.2 154.4) 115.8 120.5Fishing and forestry 2.6 2.4 2.9)Industrial 96.0 114.9 149.5 108.0 128.1

Parcel post and temporary transactions li0 _14. 16.6 12.0 11.7

Total domestic exports 236.4 276.5 323.4 235.8 260.2

Re-exports 8.0 8.6 2.1 -- 1. 9.1

Total exports 244.3 285.1 332.5 242.9 269.3of which to: UK 58% 60% 56% 57% 52%

Northern Ireland 12% 12% 13% 13% 14%Other EFTA 1% 1% 1% 1% 1%EEC 11% 9% 9% 9% 10%North America 10% 1% 12% 11% 13%Other countries 8% 7% 9% 9% 10%

Source: Ministry of Finance;Trade Statistics, various issues.

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/1Table 4.1: EXTERNAL PUELIC DEBT OUTSTANDING (INCLUDING UNDISBURSED) AS OF

DECEMBER 31, 1968 WITH REPORTED ADDITIONS JANUARY 1-SEPTEMBER 201969

( thousands of US dollars)

Debt Outstanding Reported AdditionsDecember 31, 1 8 Jan.1-Sept.30, 1969

TOTAL EXTERNAL DEBT 2

Privately held debt 71 254 552758Publicly-issued bonds 27322Suppliers 3,21United Kingdom 1,^6United States 1,368

Financial institutions 39,240 28t43Canada 9,600 12,000United Kingdom 2,640United States 27,000Fed. Rep. of Germany 13,661Switzerland 2,775

Loans frm governments 1382166United States 13T166

Reparations 6 476

1 Debt repayable in foreign currency with an original or extended matiityof one year or more.

Source: Statistical Services DivisionEconomics Department

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Table 4.2: ESTIMATED FUTURE SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBTOUTSTANDING INCLUDING UNDISBURSED) AS OF SEPTEMBER 30, 1969

(thousands of U.S. dollars)

Debt outstanding at Payments during the yearYears the beginning of the Amortization Interest Total

year; includingundisbursed

1969 216,185 6,615 7,851 14,4661970 265,328 15,617 12,326 27,9421971 249,712 16,332 12,525 28,8571972 233,380 19,017 11,756 30,7731973 21,363 19,017 10,686 29,7031974 195,346 16,725 9,618 26,3631975 178,622 20,870 8,737 29,6081976 157,751 20,770 7,607 28,3771977 136,981 20,527 6,529 27,0561978 116,455 18,123 5,,474 23,5971979 98,332 15,720 4,647 20,3671980 82,612 15,666 3,942 19,6081981 66,946 15,943 3,260 19,2031982 51,003 15,oo4 2,560 17,5641983 35,999 26,865 1,956 28,821

/1 Includes service on all debt listed in Table 4.1 except $12,000(revolving credit) for which repayment terms are not known.

Source: Statistical Services DivisionEconomics Department

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Table 51 : SUMMARY OF BUDGET OPERATIONS(millions of pounds)

Budget1966/67 1967/68 1968/69 1969/70

Current Revenue

Customs and excise duties 122.8 132.4 148.6 165.1

Income tax 64.0 70.0 80.7 90.1

Other tax revenue 34.7 45.6 53.0 65.7

Motor vehicle duties 10.4 11.6 12.7 13.1

Non tax revenue 58.9

Total current revenue 27. U. 345.5 32.9

Current Expenditures

Social welfare 43.0 45.1 49.1 51.9

Education 31.3 35.8 44.6 49.1

Health 18.9 22.1 25.7 30.6

Agriculture 40.8 53.3 60.6 65.2

Industry 4.8 6.6 8.2 9.4

Transport 12.1 13.0 14.4 14.3

General services& 44.1 46.4 51.5 52.8

Other /771 83.3 99,-:7.' 119.6

Total current expenditureo 272.1 0 392.9

Current deficit (-) or surplus .Q-Z. -0.2 .3 -

Government Capital Expenditure& 68.2 2 101.2

Total deficit 67.4 Z5.4 115.0 101.2

Financing of the deficit

Loan repayments to Government 1.9 1.1 6.0 1.6

Domestic borrowing: public 26.3 30.7 40.1 )banking sector 16.2 25.0 47.0 ) 99.6departmental funds 12.9 18.5 14.0 )

External borrowing 9.8 - 7.9)Change in EKchequer balance 0.3 0.1

67. 7.4 115.0 101.2'

Includes post office, defence, justice and public service pensions

2 Includes debt service, payments to the Road Fund and miscellaneous expenditure

Expenditure includes (dispersed over various individual items) grants to Local

Authorities as follows (millions of pounds): 1966/67 - 46.7; 1967/68 - 52.6;

1968/69 - 57.7; budget 1969/70 - 65.9. Government grants constitute about 50

percent of total revenues of Local Authorities. Including these grants, aggregate

current revenue of Local Authorities equals current expenditures.& The capital program of the entire public sector is given in Table 2.

Source: Ministry of Finance, published and unpublished documents; Central Bank, Annual

Report 1968/69.

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Table 5.2: PUBLIC SECTORL CAPITAL PROGRAM AND ITS FINANCING(millions of pounds)

Budget1966/67 1967/68 1968/69 1969/70

1. Building and construction:(i) Housing 22.6 25.6 28.1 29.6

(ii) Sanitary,and miscellaneous services 3.5 3.5 4.5 5.8(iii) Education 4.9 7.3 10.8 11.1(iv) Hospitals 3.1 3.6 .3.3 3.6(v) Other building and construction 0.9 1.1 1.1 1.6

Total 35.0 112 4117

2. Ports, harbours and airports 1.8 2.5 3.5 5.13. Tourism 0.9 1.3 2.2 2.24. Agriculture (including arterial drainage) 13.0 13.9 15.5 14.15. Agricultural credit 3.8 4.3 5.2 5.36. Forestry 1.8 1.9 2.0 2.67. Fisheries 0.4 0.6 0.7 0.98. Fuel and power 14.5 14.6 19.0 19.89. Telephones 5.9 6.1 6.4 7.5

10. Transport 9.1 10.7 20.0 31.911. Industry 7.6 9.8 14.1 18.712. Industrial credit 3.1 :2.8 4.5 5.913. Radio and television 0.4 0.5 0.5 0.714. Miscellaneous 0 0.3 0.1

Total public investment 22.6 1 o.4 14.6 166.8

Financed by:

Government fundsL2 66.9 75.2 91.3 101.2

Internal funds of Local Authorities andState enterprises (depreciation etc.) 20.0 20.0 32.3 34.8

Borrowing directly by Local Authoritiesand State enterprises 10.7 18.0 30.0

2_. 1 l 166.8

1 Includes the Central Government, Local Authorities and State enterprises.2 Differences with Government capital expenditure as given in Table 2 are caused

by capital outlays not included in the program.

Source: Ministry of Finance, published and unpublished documents;Central Bank, Annual Report 1968-69.

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Table 7.1: VALUE AND COMPOSITION OF AGRICULTURAL OUTPUT

(millions of pounds; current prices)

1966 1967 1968

/2Milk for creameries 42.8 51.4 57.3

Other Milk 20.0 20.7 20.5

Cattle and calves 69.1 88.7 .94.2

Sheep, lambs and wool 15.2 13.4 14.9

Pigs 29.6 27.6 31.8

Other livestock products 21.0 19.5 20.1

Total livestock products 196.7 221.3 238.8

Total crops 40.8 46.1 54.5

Turf 4.8

Total agricultural output 242.5 272.2 298.3

/1 Includes milk subsidies

Source: Department of Agriculture,published and unpublished documents