The First Loan of £85,000

The first Loan of £85,000 was placed in the hands of the Provincial Agents in Great Britain, at different times, and sold in small sums, as the circumstances of the Province required. No considerable difficulty was therefore experienced in the matter of its disposal, the more especially as it was not found necessary to have recourse to the means usually resorted to in negotiating large Loans, viz.—the medium of the Stock Exchange. The position of the other Loans is however widely different. At the time when it was found necessary to place the Half-Million Loan on the English Market, difficulties, some of which could not have been easily foreseen, and others which until then, though in existence, were not recognised, presented insuperable obstacles to its disposal. The principal of these difficulties were:—

1st. The unusual stringency which then prevailed in the money market of England.

2nd. The known existence of a serious and expensive war in New Zealand, which would inevitably result in a Colonial Loan, and the almost immediately subsequent announcement that such a Loan, amounting to £3,000,000, had been authorised by the New Zealand Parliament.

3rd. The overshadowing effect of the last mentioned Loan, and its known character as creating a preferential charge upon the Territorial and other Revenues of the Colony, and the consequent refusal of the Committee of the Stock Exchange to recognise merely Provincial Loans as marketable securities.

Thirdly. The financial position of the Province:—

Statement of Estimated Revenue of the Provincial Government of Otago for the half-year ending 30th September, 1864 ... £199,694 12s. 8d.

Statement of Estimated Expenditure of the Provincial Government of Otago, for the remainder of the half-year ending 30th September, 1864—

On the 27th June, 1864, the overdraft at the Bank of New Zealand in Dunedin, was £113,012 9s. 5d., but on the 4th July instant, it had been reduced to about £75,000, which amount the Provincial Government is not at liberty to exceed.

It will be seen by the foregoing Estimate of Revenue for the half-year, from 1st April to 30th September, 1864, and of Expenditure from 27th June to 30th September, that the deficiency to be made good by Debentures or otherwise, was likely to be of considerable amount. On a careful examination of the condition of the Provincial accounts at the beginning of the present month, the Superintendent, with the aid of the Provincial Treasurer, found that in all probability the deficiency at the end of the current financial year (30th September, 1864) would amount to about £40,000.

Assuming this position to be approximately correct, the general financial position of the Province would appear to be somewhat as follows:—

Assets.

Loans (valued at par)—

Liabilities.

Showing a Balance of £262,000, to become available out of existing Loans, which amount the Superintendent considers sufficient to provide for all immediately required public works, railways excepted.

Fourthly.

The difficulties which prospectively threaten the Province, and the means by which they may be avoided. These difficulties are two-fold, and are connected with existing arrangements between the Provincial Government and the Bank of New Zealand.

By those arrangements the Bank of New Zealand will be entitled, on His Excellency's assent being given to the Otago Loan Ordinance, 1862, Amendment Ordinance, 1864, to sell, below par if necessary, Otago Debentures to the amount of the united overdrafts upon that Bank in London and Dunedin. Should this power be acted on by the Bank, a loss most serious in character and amount may be sustained by the Province. Further, as already stated, the Provincial Government cannot exceed the limits of its present overdraft in Otago, consequently, the possibility exists that the Government may not be able to meet the whole of its liabilities for the current financial half-year. In order to avert either or both of these evils, the Superintendent suggests that the Government should afford an assurance that they will prepare and introduce a Government measure at the next Session of the New Zealand Parliament, a Bill by which the guarantee of the Colony may be given to the existing Loans of the Province, in order that they may be enabled to rank in the English market as Colonial and not merely as Provincial Securities; and further, that should it become necessary to do so, the Government will make a temporary advance to the Province of from £40,000 to £50,000, to enable it to meet existing engagements entered into previously to the fact being known that Provincial Debentures were unmarketable securities. As security for the repayment of such advance, the Superintendent would be willing to place with the Government, Provincial Debentures, or give such other security as may not be inconsistent with the relative positions of the General and Provincial Governments.

The Superintendent is of opinion that the claims of the Province of Otago to participate in the benefits to accrue from the application of a Colonial guarantee of its existing Loans are based on nothing less than bare justice. During the past two years, its contributions to the General Revenue from Customs alone amount to £286,000, while the contributions thereto by the whole of the Northern Island amounted, during the same period, to only £212,714; and it may be fairly affirmed, that the advantages it has derived from the expenditure of the General Revenue have been The proceeds of the Quarter ending 30th June, 1864, is approximately estimated, the actual amount not having yet been published.—J. H.