BANK OF FINLAND MONTHLY BULLETIN

...... _--_.__ .. __ .... _...... •...•.. _------Vol. 42 No.8 AUGUST 1968

TAXATION REFORMS In order for fiscal policy to sene the aims investments were made within the firm. A of e~onomic growth efficiently, the principles new, perhaps highly competitive firm or a of taxation must be devised in such a way firm with a different distribution of assets that they do not adversely affect the economic did not 'have access to the same source of allocation of resources nor the functioning finance. of the financial market. A major reform, The new law reduces the scope of this passed by Parliament in June and effective tied-up form of finance by limiting the from 1969, concerns the taxation of business maximum right of undervaluation to 50 per income (see also Bulletin No.3, 1968). The cent. Visible reserves are thus disclosed by new law replaces the previous regulations cutting out the undervaluation of inventories, in an attempt to mould the tax treatment but they cannot be treated as current and of business income into a consistent and taxable returns at once without causing unambigous whole, where concepts are based financial difficulties for firms. It is there­ on modern views in business economics. A fore stipulated that such new reserves can central aim of the reform - which has been be transferred to a special account, a business under preparation for years - was to create development fund, which a firm can use for a fiscally neutral taxation, which would not acquisition of assets within ten years. A discriminate between different types and firm can, however, transfer from the fund structures of enterprises nor set obstacles to to its own assets a tax-free amount equalling their expansion. the initial cost of buildings, machinery and The previous legislation affected the struc­ equipment purchased in 1968-1973, if such ture of firms' financing as well as their investment is considered to promote economic investment decisions in a way not necessarily growth, competitiveness on foreign markets conducive to economic growth. In the first or employment. place, there 'were very liberal rules regarding According to the earlier law taxpayers the undervaluation of inventories, which could include in their stocks those goods made it possible for many firms to accumu­ ordered at a fixed price but not yet deliv­ late hidden inventory reserves and thus to ered. The new law will permit this only defer the payment of taxes. This would lead under exceptional circumstances. to cases where tax considerations made it worthwhile to expand inventories, and it also meant an advantageous form of self-finance ------_._- - given the high tax rates -provided that On page 18, Public Finance in 19~:.__ J

12708-67 2 No.8, I968 The previous legislation allowed for the time in such a way that the balance to be deduction of interest paid on borrowed written off is an accounting aggregate, capital, although with certain restrictions in independent of the physical lives of the local government taxation. Dividends, or particular objects. compensation for own capital were not Rules of apportioning items of expenditure deductible. In order to treat financing by and income to a given tax year have been equity and by debt more uniformly and to made more precise in the new law. An lessen the double taxation of dividend income associated law was passed allowing taxpayers first as a corporate profit, then as personal to offset losses incurred in a given year income of the recipient, the new law against profits made in the five following stipulates that 40 per cent of dividends and years (a new establishment can carQ- over the like can be deducted from business in­ eventual losses made during the first five come in State taxation. The stockholder years of operation within the first ten years). can further deduct 15 per cent of dividends, Similarly, an individual is allowed to spread liable to taxation, from his personal income a bulk income, received in one year but tax, as previously. Dividends paid out to earned for a longer period, over several years companies are taxed as business income to avoid undue progl'essivity. only in the distributing company. - The Two earlier tax laws, passed in December new law does not yet remove the double 1967 and effective from 1968, must be taxation entirely, but the way has been mentioned in this connection. The first one opened in the right direction. concerned wealth taxation; the main revision This notwithstanding, it is deemed quite was to abolish double taxation and to exempt imperative that new issues of shares should from wealth tax the assets of an enterprise be encouraged without delay. The law there­ whenever the shareholders are individually fore abolishes completely the double taxation taxed for their shares. on new emissions of shares made in 1969- 1978: the total amount of dividends payable The second law dealt with the taxation on them can be deducte.d in State taxation of farm income. Taxable farm income was from a company's taxable income during six previously assessed according to estimated successive years. In addition, dividend income farm yields, adjusted for differences in soil, up to 400 marks is exempt from personal location etc. and averaged over three years. income tax during the above-mentioned ten In the new law the taxable farm income is year period. to be determined for each taxpayer as the difference between actual returns and costs. As regards the depreciation rate on fixed assets, the new law confirms the use of the What still remains to be done is a codi­ degressive method of depreciation, where fication and simplification of the personal annual instalments are calculated as a per­ income tax system, as well as the alignment centage on the value outstanding, and ex­ of indirect taxation with the principles com­ tends its use also to buildings, which so far monly used in other countries. The ultimate have been written off by the straight-line aim is to build up a modern, internally method in equal instalments. Degressive tim­ consistent fiscal system, which neither retards ing is considered to be in better harmony economic expansion nor harms the competi­ with modern technological development and tive position of Finnish industry 011 inter­ need for innovation. Depreciation rules for national markets. mobile fixed assets are simplified at the same July 22, 1968 No.8, 1968 3 BANK OF FINLAND Mill. mk 1967 1968 Dec. 30 I June 30 June 28 July 8 July 15 July 23 I, I I I I I \ BALANCE SHEET I Assets

Of'dinary note COfJer •••••••••• 0 •••••••• 798.8 775.8 1470·9 1357·3 1387.6 1476.1 Gold ...... 188.8 149·8 191.3 191.3 191·3 191.3 For~ exchange ...... 512.3 550.8 I 155.1 1041.2 1074·0 I 161.7 Foreign bills ...... 72·5 54·9 78·4 78.7 76.2 77.0 Foreign bonds '" ...... 25·2 20·3 46.1 46.1 46.1 46.1 Supplementary note COfJer ...... 1130.7 892.1 860.1 871.7 780.5 833.1 Inland bills discounted In foreign currency ...... • 122·5 34·7 31.8 31.8 31.8 31.8 In Finnish currency ...... 140·7 82·3 133·5 121·4 124·9 133·9 Rediscounted bills ...... 867·5 775·1 694.8 718.5 623·8 667·4

Other assets ••••••• 0 •••••••••••••••••• 707.7 556.6 532.1 447·7 480.1 308.0 Finnish bonds ...... 370·5 362.8 316.2 235·1 273.1 98.1 Cheque accounts ...... 4·0 4·4 3·1 4·8 2·5 2.6 Finnish coin ...... 12·3 15·1 17·3 17·1 17·3 17·3 Other claims •••• 0 •••••••••••••••••• 320·9 174·3 195·5 190·7 187·2 190.0 I Total 26 2 I I 37. 2224·5 2863.1 2676.7 2648.2 2617.2 , Liabilities

Notes in circulation ...... 1052.1 1062.1 1101·5 1060·9 1 0 39.9 1020.8 Liabilities payable on demand ...... 139.6 99.0 129.9 Ill.l 109.7 Il2·4 Foreign exchange accounts '" ...... 74·7 50.8 86.1 71.5 69·9 73·7 Mark accounts of holders abroad ..... 14.1 13·5 12·7 13·2 13·5 13·6 Cheque accounts Treasury ••••• 0 •••••••••••••••••• 4·4 2·3 0.0 2·9 1.4 2.8 I Post Office Savings Bank ...... 17.2 5-4 3·0 3·9 0·3 0·9 Private banks .0 •••••••••••••••••• 9·8 6.1 15·1 7·5 II·9 8.2 Other •••••••• 0 ••••••••• 0 •••••••• 1.8 1·3 1·4 0·9 1.3 1.6 I Other sight liabilities 00 •••••••••••••• 17.6 19·6 II.6 II.2 II·4 II.6 Term liabilities ...... •...... 553.1 379·3 782.4 653·1 649·3 634.6 Foreign ...... ••...... 339·5 204·0 290.8 159·5 159·5 159·5 Finnish ...... " ...... 213·6 175·3 491.6 493·6 489.8 475·1 Equalization accounts ...... 4 22•0 239.8 377·5 378.8 375·7 374-5 Bank's own funds ...... 470 .4 444·3 471.8 472.8 473.6 474·9 Capital ...... 300.0 300.0 300.0 300.0 300.0 300.0 Reserve fund ...... 129.5 129.5 150.0 150.0 150.0 150.0 Profits undisposed ...... ------I Earnings less expenses ...... 40·9 14·8 21.8 22.8 23.6 24·9 Total 2637.2 2224·5 2863·I 2676.7 2648.2 2617. 2 STATEMENT OF NOTE ISSUE Right of Dote issue Ordinary cover ...... 798.8 775.8 1470·9 1357·3 I 387.6 1476.1 Supplementary cover (Upper limit 500 mill. mk; since Nov. , 30, 1966, 700 mill. mk) ....•..•.....• 700.0 700•0 700.0 700.0 00 0 7 • 700.0 i Total 1498.8 1475·8 2170.9 2057·3 2087.6 2176.1 Note issue i Notes in circulation ...... 1052.1 1062.1 I 101.5 1060·9 1039·9 1020.8 Liabilities payable on demand ...... 139·6 99·0 129.9 III.I 109·7 II2·4 Undrawn on cheque credits ...... 3·1 2.6 4·4 2·7 5·0 5·0 Unused right of note issue ...... 304.0 312.1 935·1 882.6 933·0 1037·9 Total 1498.8 1475·8 2170·9 2057·3 2087.6 , 2176.1 Rediscount rate since April 28, 1962, 7 per cent. No.8, 1968 4 BANK OF FINLAND Mill. mk

Gold and foreign accounts Treasury I - 1 End of Net claim. year and Foreign I Other Other Net Bills Other Liabilities, month -=:~and I~iabili~ies foreign claims, Cheque on the foreign i on foreign exchange I foreign foreign and Treasury exchange exchange reserve assets liabilities assets bonds net account I accounts (1--2) (3+4-5) (7+8-9) 1 '1 I 1 2 3 4 S 6 7 8 9 10 1961 691.5 13·4 678.1 87·5 128·4 637-2 27·7 5·9 1.1 32.5 1962 637·7 17·1 620.6 67·7 U4-9 573·4 - 28·9 5·5 23·4 1963 I 752.2 18.2 734.0 65.6 100·5 699-1 - 18.9 0_2 18·7 1964 973·4 84·7 888·7 76.3 82.8 882.2 - 8.9 5·4 3·5 I!)65 860·9 44·8 816_1 83.8 56.5 843·4 - - 1.1 1.1 - 2_2 1966 555·9 61.2 494·7 81·3 100.8 475-2 II·5 - 1.1 39·8 - 29·4 1967 701.1 74-7 626·4 97·7 353- 6 370.5 8·3 - 14·8 4-4 - 10·9

1967 May 699·3 60·7 638.6 75·3 171.9 542.0 8·3 - 1.1 4·9 2·3 June 700.6 50.8 649·8 75.2 217.5 507.5 8·3 - 1.1 2·3 4·9 July 772.0 51.0 721.0 77.8 217.4 581 .4 8,3 - 1.1 4·9 2·3 Aug. 736.9 49·1 687.8 76.7 217·8 546·7 8·3 - 1.1 23·6 - 16·4 Sept. 780.6 53.6 727.0 77·9 293·5 5II·4 8·3 - 1.1 1.0 6.2 Oct. I) 984.0 64·5 919·5 106·3 377·3 648.5 8'3 - 1·3 10.6 - 3.6 Nov. 878.6 71.9 806·7 106.8 357-4 556.1 8'3 - 2·3 18.4 - 12·4 I Dec. 701.1 626·4 97·7 353.6 370.5 8·3 - 14·8 4·4 - 10·9 I 74·7

I 1968 Jan. 8U.2 67.8 I 743·4 98.6 350.5 491.5 4·1 - 63·6 0·3 - 59·8 Feb. 996·4 66.1 930·3 98·5 349·3 679·5 4·1 -U8.2 2·7 -u6.8 0 I March 1095·4 67.9 1027.5 101.4 349·5 779·4 4·1 -164·4 5. -165·3 I April 1193.6 73·4 1120.2 127·3 347.2 900·3 4·1 -201.4 3·0 -200·3 I May 1 235.0 8I.5 1 153.5 127.2 346.3 934·4 4·1 -249·7 0·7 -246·3 I 86.1 0 1081.3 -276.9 0.0 -270.2 I June i 1346·4 1260·3 I 124·5 3 3.5 1 I 6·7 I

Foreign exchange situation, mill. mk _ .... -_.--_.--_.__ .----_ .. _----... - ----.--._--_.--.---- Net holdings, Dec. 30,1967 Net holdings June 28, 1968 Change in ----~------I-----~~--- ~~~J-I-~ther·-I-·Total-- :~~n':f I Other I Total June IJan.-June

.I Gold ...... Convertible currencies ...... Other currencies ...... 1

•1 Total ......

•) Subsequent figures are affected by the change in the par value of the mark from 0.27771 grams of fine gold per mark (equivalent to 3.20 marks per U.S. dollar) to 0.21159 grams of fine gold per mark (equivalent to 4.20 marks per U.S. dollar), effective Oct. 12, 1967. No.8. 1968 5 BANK OF FINLAND Mill. mk

Finnish credit institution. Other ------I I End oC I Liabili ties, Cheque accounts I I Notes in Net claim. I year and Redis- - Net claims Inland i circulation month Private Post ffice Mortgage I on the bills in Other Liabilities on the rest counted I 9 I Iof economy bills I bank, Savmgs Bank of I banks Finnish advance. ') Bank Finland 0 1(1-2-3-4) currency (6+7-8) ') y, I 1 2 3 4 S 6 7 8 9 10 1961 294.6 44·7 4·4 12·5 233.0 70.8 107.3 2·9 175·2 I 837. 1 1962 401.2 - 4.0 53·3 0.8 351.1 33·5 99.6 4.1 129·0 774·4 I 1963 325.3 1·3 3·0 1.2 319.8 57·2 94·4 1.7 149·9 I 943·7 1964 448.4 16·4 49.6 0.6 381.8 67·1 103·0 1.6 168·5 1002·7 1965 640.6 II·9 8·3 0.2 620.2 26.0 121·9 31.6 II6·3 1028·5 1966 915.2 13.8 17·3 - 1·3 885·4 II2.2 152.9 73-2 191.9 1106.2 I 1967 867·5 154·7 34·5 + 0.0 678·3 140.7 439. 1 56.0 523.8 1 052.1 I

1967 May I 2 95.8 166.8 60.8 201.8 1010.6 774. 120·7 1 75·6 - 5·0 582·9 June 775·1 125.4 22·7 - 1·3 628·3 82·3 203.8 58.5 227·6 1062.1 July 761.6 79.2 143·8 + 0.0 538.6 85·3 214.9 55.1 245.1 1 019.8 Aug. 772.6 93·7 54.2 0.1 624.6 85.1 216.8 55·5 246.4 1000·9 Sept. 749·4 II 6.4 18·7 + 0.0 614·3 97.6 214.3 58•8 253.1 1 047.9 Oct. 750.0 103.0 33.0 + 0.0 614.0 109.2 226.8 57·5 278.5 938.6 Nov. 780.2 170·9 69.1 0.2 540•0 II3·9 295·5 51•8 357.6 937·9 Dec. 867.5 154·7 34·5 + 0.0 678.3 140·7 439·1 56.0 523.8 1052.1 I

1968 I Jan. 833·9 153·9 19·5 0.1 660·4 149·3 362·3 49.8 461.8 1010·3 Feb. 682·9 163.8 18·4 0.1 500.6 136.5 283.6 49·1 371.0 956.6 March 697.0 167·4 21.2 0.2 508.2 137·3 258.5 48.6 347.2 979.1 0 1 April 653·4 156·3 19.6 + 0.0 477·5 141.0 229.0 49·9 320.1 99 . May 701.7 160.8 17·4 0·3 523.2 131•8 228·3 50·9 309.2 1035·7 312.3 1101·5 June 694·8 I 180·5 20·3 0.1 493-9 133·5 223·7 44·9 ') Including cash reserve accounts in 1961 and from February 1967·

Mill. ')!m.!,k ______---r ______..., Mill.m'l-!k~ ______,- ______,

1400 1000

1200 Notes in circulation 800 Net claims on banks 600 \ __ ..... ' r--., I "\ ...... ",.. V ,,''-_..., __

400

200

o~--~----~----k------i

-200

1968 1967 1967 6 No.8, 1968 DEPOSITS BY THE PUBLIC - FOREIGN EXCHANGE RATES Mill. mk:

Sight deposits Term deposits End of , year Cheque accounts Co-op. Savings Total and Postal credit Post depart- (3+3+9) month giro Commer- Savings societies &: Office menll of All credit commer-I All credit accounlB eia! banks banks their cen- Savings co-op. institutions cia! baRks institutions ual bank Bank stores I 3 3 4 S 6 7 8 9 10 1955 395·7 495·S 167.7 1222.6 1312.6 742·7 3SI.7 191·9 3 SSI.S 4515.3 1959 557·5 678.1 140·9 1505·5 1525.5 860·3 431.2 219.1 4541·9 5360.9 1960 550.8 6S0·7 135·9 1813·6 1768.6 1052·5 485·2 254·3 5404.5 6221.1 1961 577-9 72O.S 143·S 2105·9 2079.6 1241.0 55S.2 285.3 6270·3 7 134.9 1962 649·0 Soo.S 168·5 2270.4 2210.8 1325.5 606.6 293.2 6706.7 7676.0 1963 715·3 S76.0 250.3 2441.0 2336•6 1448.0 648·5 310·7 7 185.0 83II·3 1964 683·3 855·4 296.5 2816·7 2614·7 1681·4 713·8 331·4 8 158.2 9310.1 1965 665·7 843·7 309·4 3160.1 2954·4 1953·5 773.2 357.2 9 198.6 10351·7 1966 625.5 849.4 31S.0 3 637.2 3329.9 2225.8 863·6 380·7 10 437.3 II 604-7 1967 649.8 834.0 340.9 4080.8 3644.6 2439·7 941.2 431·3 II 537.9 12712.8

1 1967 May 596.1 777-8 337.6 3782.6 3596•1 2348.4 908·3 392•1 10928·7 12044.1 June 548.1 720.5 361.6 3766.3 3463·5 2306•2 906.1 387.2 10829.5 II 9II.6 I July 581·9 755·5 316.5 3775.0 3464·2 2316.0 908·5 386.0 10849.9 II 921.9 Aug. 601·9 789·1 295·9 3 808•2 3491.9 2328.2 910·3 385·4 10924.2 12 009.2 Sept. 572.2 76p 286.2 3 821.0 3520.7 2348.8 914.4 393.2 10 998.2 12047·5 Oct. 708.3 910.9 312.4 3 857.1 3522.3 2350.2 909·9 395·9 II 035.6 12 258.9 Nov. 663.0 850·5 310.9 3 879.2 3543.0 2354·7 912.2 398·5 II 087.8 12249·2 Dec. 649·8 834·0 340·9 4 080.8 3644·6 2439·7 941.2 431.3 II 537.9 12712.8

1968* I Jan. 622·3 788.2 444.8 4 049.8 3645·9 2432.7 954·9 422·7 II 506.3 12 739.3 ! Feb. 672·5 841.1 407.1 4148·5 3704.1 2475·8 967.4 421.8 II 717.9 12 966.1 Much 664.0 837·9 353·5 4167.7 3736.9 2498.4 978.0 421.1 II 802.3 12993·7 April 674.9 852.2 454·4 4 209.9 3750·5 2525.0 979.0 420·9 11885·5 '3 " .., May 697·3 890·9 403.6 4 212.2 3 758·5 2 520.6 972.0 417·5 II 881.0 13175·5 I

June I 668.8 856·9 425·7 4 249.2 3740·9 2510.6 965.4 414·7 II 881.0 13 163.6

100% High- Selling rate. for foreign exchange I End of Index-tied interest i month deposits depos- July 22, 1968 I its I mk mk 1967 Aug. 2961·7 699.2 New York ••.• I $ 4. 1870 Zurich ...... 100 Fr 97·40 Sept. 0 68 2 3 49.4 7. Montreal . ... I $ 3.9000 Paris ...... 100 FF 84·21 Oct. 3529.1 680.0 Nov. 3745·1 645.1 London ...... 1[. 10.01 50 Rome ...... looUt 0.6725 Dec. 3997.2 610·5 Stockholm 100 Kr 81.03 Vienna ...... 100 S 16.23 1968* Oslo ...... 100 Kr 58.63 Lisbon ...... 100 Esc 14·62 i Jan. 4 272.0 561·9 Copenhagen 100 Kr 55·7! Reykjavik .... 100 Kr 7-35 Feb. 4409.0 525·3 .. March 4458.0 545·4 Frankfurt o. M. 100 DM 104.46 Madrid ...... 100 Pta 6.02 April 4 294.1 1 695·3 Amsterdam 100 F1 u5·60 Moscow, cleax. ) I Rbi 4·6799 May 3909.7 973.8 .. 8 Clearing doUaxs I) I CI $ June I 3612.1 I 1244.9 Brussels •••••• 100 Fr 8.3 00 4·212 ') Also Bucharest. I) Berlin, Budapest, Prague, Sofia, Warsaw. No.8, 1968 7 ADVANCES TO THE PUBLIC-MONEY SUPPLY Mill. mk

Granted by ITypes of advances ,. Total End of Co-op. Money I year and Post Office credit Loans Supply month Commer- Savings Savings societies & Mortgage & Cheque (I to s) cial banks banks Bank their cen- banks Bills credits (6 and 7) ual bank 1 2 3 4 S 6 7 g 9 1958 1745·4 1154.8 290.3 835.1 219·3 40II·5 233·4 4244·9 1302·3 1959 2096·9 1327.2 331.4 967.3 325.8 4772.7 275·9 5 048.6 1448·4 1960 2604·6 1549·3 395.0 1176.0 452.2 5861.9 315.2 6177.1 1494·6 I 1961 3048.0 1817.6 436.8 1462.7 515.2 6928.2 352.1 7280·3 1646.1 1962 3 299.9 2018·5 508·7 1600.6 614·7 7680.8 361.6 8042.4 1722.5 1963 3472.5 2134·5 544·0 1757·7 664·3 8226.2 346.8 8573.0 1986·5 1964 3916.4 2318.0 607.7 2057·5 829.4 9320·5 408.5 9729.0 2042·5 1965 4 279.6 2609.2 716·5 2348·4 899·4 10 439.6 413.5 10853·1 2085.0 1966 4867.7 2951.4 783·9 2598·7 908.8 II 630.7 479·8 12 1I0.5 2213.7 1967 5 203.7 3 247.7 869.0 2779·5 1026·9 12 598.9 527.9 13126.8 2183.0

1967 I May 4920·4 3 044.2 825.7 2 633.5 928·7 II 846.7 505.8 12352.5 2080.8 June 5 014.7 3 063.0 832.8 2601·5 924·4 II 882.8 553·6 12 436.4 2105.1 I July 5028·9 3 092.9 838.8 2614.8 924·7 II 970.8 529.3 12 5°0.1 2°35·9 Aug. 5 012.4 3 121.5 851.9 2636.4 921.0 12031.8 5II·4 12543.2 2039.5 Sept. 5°83·9 3 163.3 860.6 2677.0 918.2 12150.6 552.4 ---12 703.0 2016.1 Oct. 1) 5 073-5 3 206•2 859.6 2740.9 1 043.8 12 443.0 481.0 12 924.0 2075.6 Nov. 5 II4·3 3 238.7 861.0 2764-8 1033-6 12 504.5 507.9 13012·4 2 059.7 Dec. 5 203.7 3 247.7 869·0 --2779·5 1026·9 I2 598.9 527.9 13126.8 2183·0 I 1968* Jan. 5140.2 3 242.5 876.0 2648.7 1026.1 12 437.6 495·9 12 933.5 2201·7 2 Feb. 5130·9 3 242.3 890.8 2 632.7 ) 1019.0 12 413.6 5°2.1 12915·7 2173.7 March 5 201.6 3 241.8 903.8 2629·7 1017·3 12441.3 552.9 12994.2 2150.2 April 5198·9 3 261•1 914.8 2645.4 1006·3 12528·7 497·8 13026·5 2274·4 May 5 235.3 3 287.3 915·5 2661.0 1004-5 12610·5 493.1 13 103.6 2267.0 I June 5 288.9 3 297.0 920.8 2 679.2 999·9 12646.8 539.0 13 185·8 2308.1 I ') See footnote on page 4 • •) New series.

Mill. mr:k'---______--, Mill. mi'-'k>-' ______--, Mill. mrk"--______-,

1200 Term deposits 1200 Sight a"d term deposits 1200 Advances by the publ ic by the public to the public 1000 1 000 1001)

800 800 800

600 600 600

400 400 400 200

o~~------~ o~~------·--~ -200 -200

Increase from beginning of year --1967 --1968 8 No.8, 1968

STATE FINANCES Mill.mk

Revenue 1 1967 Expenditure

I Income and property tax (net) ...... 1685 Wages, salaries, pensions etc..•.•...•.. ,. 1266 Gross receipts ..•...... (4965) Repair and maintenance ...... 239 Refunds & local authorities ...... (-3 280) Other consumption expenditure ...... 563 Other taxes on income and property ...... 40 Total consumption expenditure .•.. 2068 Employers' child allowance payments ... . 486 Sales tax •...... 1908 State aid to local authorities ...... 1015 Revenue from Alcohol Monopoly ...... 465 State aid to industries ...... " .. " .. "I 866 Customs duties & import charges ...... 466 of which: agric. price subsidies ... . (645) Export levy ...... 0 14 Child allowances " ...... " .... "" 3 9 Excise duty on tobacco ...... 40 4 Share in nat. pensions & health insurance 351 & & on liquid fuel ...... 477 Other transfer expenditure ...•.....•.. 678 Other excise duties ...... 113 Total transfer expenditure " ...... 3 219 Tax on autom. and motor cycles ...... 1 67 Stamp duties ...... 179 Machinery & equiment ...... 225 Special diesel etc. vehicles tax ...... 74 House construction ...... • 283 Other taxes and similar revenue ...... 47 Land and waterway construction ...... 741 Total taxes 6 525 Total real investments ...... 1 2 49

Interest on State debt ...... 218 Miscellaneous revenue ...... Index compensations ...... 18 Interest, dividends etc...... Net deficit of State enterprises ...... 41 Sales and depreciation of property ...... " Other expenditure ...... 2 Redemptions of loans granted ...... Total other expenditure ...... 279

Total revenue ...••.•...... 7 282 Increase in inventories ...... 38 Lending •...... 40 6 3 Other financial investments ...... 131 Total bor~OWing"""""""""""1 60 - Fore.tgn ...... •...... 157 Total expenditure ...... 7390 - Domestic ...... •...... 446 Redemptions of loans ...... 577 - Foreign ...... 71 Deficit ...... 82 - Domestic ...... 506

Total Total

Mill.",k 1968 Debt /~~ I 7500 I, Dec. Dec. Jan. I Feb. IMarch [ April 1 May* I External debt ..•. 1337 1844 18451 18391 1820 1820 1828 Ordinary loans .... 1980 2016 1970 1969 1962 1928 2020 Indemnity bonds etc. 93 2 2 2 2 2 2 Short-term credit .. 95 146 130 II6 171 161: 160 I Cash debt (net) .... -II9 -56 57 184 -51 95 Internal debt .... 2049 2108 2159 2271 208 2186 4 -500 Total debt ...... 3386 2 00 4 1I0 0 40061 . . 395 /4 4 39 4 1 "I Total debt, mill. 8 10 0 0 80 2 12-month totala plotted to end of period 5 94 , 9531 9 i 93 1 956. .. I No.8, 1968 9 BALANCE OF PAYMENTS Mill. mk

Other Balance of I'!vestment Transfer current Expor" Imports Trade I Tra~spor-I Travel, I I I IBalance of Period I f.o.b. I c.i.f. I balance tatlon, net services. goods and mcome, payments, transac- I net I net services net net tiona

1962 3515 3948 -433 +201 -II2 + 71 -273 - 47 + 5 -315 1963 3 658 3878 -220 +220 -100 + 74 -"- 26 -70 + 6 - 90 1964 4109 4831 ~722 +306 -II5 + 42 -489 -101 + 3 -587 1965 4542 5287 -745 +318 -108 + 21 -514 -131 + 15 -630 1966 4784 5542 -758 +326 - 96 + 12 -516 -150 + 3 -663 1967 5 194 5816 -622 +385 - 88 + 17 -308 -209 - 3 -520 Jan.-Mar. 1966 879 1247 "":""368 + 66 - 23 + 10 -315 - 38 + 0 -353 1967 1088 1347 -259 + 91 - 24 - 2 -,-194 - 57 - I -252 1968 1385 1515 -130 + 95 - 16 + 7 - 44 - 58 + I -101 I

Apr.-June I 1966 1247 1397 -ISO +108 - 31 - 8 - 81 - 36 I - 2 II9 - 1 1967 1242 1398 -156 + 90 - 34 + 6 - 94 - 39 + I -132 I I July-Sept. 1966 1 275 1359 - 84 + 67 - 17 + I - 33 - 40 + 2 - 71 1967 1241 1 256 - IS +107 - 18 - 3 + 71 - 63 + 3 +II

Oct.-Dec. 1966 1383 1539 -156 + 85 - 25 + 9 ...:.. 87 .- 36 + 3 -120 1967 1 623 1815 -192 + 97 - 12 + 16 -:- 91 - 50 - 6 -147

Miscella- Reserve movements Miilcella- Short-term Short-term neous I Long- I Drawings Amortiza- neous import export short- ; of tions of term long-term Basic Period export credits credits term Over-all Other long-term long-term capitsl balance and pre- and pre- capital. balance Bank of foreign loans loans credits, items, , net payment., payments, 'tems incl. Finland exchange net ') net net . errors and holders I I .omissions"

1962 +271 -134 .. - 9 - 187 -74 - 43 +261 - 43 + 43 .. 1963 +513 -164 .. - 23 +236 -109 - 22 + 7 +112 -II2 .. 1964 +762 -228 - 31 - II - 95 +1I2 + 55 +101·· +179 -179 .. 1965 +434 ,-273 - 66 + 3 -532 +146 + 34 + 69 -283 +202 + 81 1966 +518 -271 - 61 - 32 -509 + 53 -II4 +21'; , -355 +321 + 34 1967 +910 -406 - 33 + 13 - 36 -II2 - 56 + 96 -108 + 84 + 24 Jan.-Mar. I 1966 + 89 - 60 + 2 - 15 -337 + 43 +243 + 18 - 33 + 38 - 5 1967 +192 - 66 + 12 + 5 - 109 - 48 + 85 + 81 + 9 - 50 + 41 1968 +214 -140 - 54 + 4 - 77 +168 +191 + 32 +314 -401 + 87

Apr.-June 1966 +II6 - 52 - 36 + 3 - 88 + 19 -II4 + 69 -II4 +121 - 7 1967 +315 - 62 + 2 + 4. + 127 + 44 + 71 -162 + 80 -105 + 25

July-Sept. 1966 +III - 67 - 9 + 20 - 16 - 3 -121 + 49 - 91 + 45 + 46 1967 +251 - 92 - 13 + 4 +161 - 95 - 53 + 45 + 58 - 77 + 19

Oct.-Dec. 1966 +202 - 92 - 18 - 40 - 68 - 6 -122 +79 -II7 +II7 ± 0 1967 +152 -186 - 34 + 0 -215 - 13 -159 +132 -255 +316 - 61 I Assets: increase -, decrease +. Liabilities: increase + decrease-. ') Including Direct investment net. 2 12708-68 No.8. 1968 10 FOREIGN TRADE

Value mill. mk Unit value indexes 1962 =100 I .---.. -_._._--_._--- Articles of export f. o. b. Period Surplus of· Articles Terms Exports Imports exports (+) Metal. en- of import of f. o. b. c. i. f. or imports Round Wood Paper gineering c.1. f. Trade (-) Total and bewn industry industry industry i timber products products product. I ;

101 1963 3 678.0 3866·9 -188·9 102 96 104 100 105 101 1964 4 131.9 4 816.5 -684.6 108 109 III 104 II3 103 105 1965 4566.0 5265·1 -699.1 II3 II5 123 106 119 104 109 1966 4816·9 5524.4 -707·5 1I2 1I2 122 105 119 104 108 I III IIO 105 I 1967* 5 230.3 5794·4 -564.1 II5 114 124 I II7

Jan.-May I 1966 1701.9 2173·4 -471.5 I 1967* 1889.2 2314.1 -424.9 I 1968* 2611·4 2721.6 -IIO.2 I

1967* April 397·4 487.3 - 89·9 May 404.4 481·9 - 77-5 110 108 II8 106 III 105 105 June 457·5 421.8 + 35·7 I July 372.8 400.7 - 27·9 108 u8 105 103 103 1 Aug. 4II·3 430.7 - 19·4 106 94 ! Sept. 465.6 420.3 + 45·3 Oct. 561•6 541.5 + 20.1 Nov. 529.9 61 5.8 - 85·9 133 133 140 127 141 128 104 I Dec; 542·3 649·3 -107.0 I 1968* Jan. 458.6 534-3 - 75·7 Feb. 399·0 465·4 - 66·4 133 137 138 130 132 140 95 March 536·7 510.0 + 26.7 } April 556·7 556.3 + 0·4 May 660·4 655·6 + 4.8 I I

Mill. "m"-'k'--______-, ·1 ndeF-x ______-r- _____--,

Seasonally adjusted valu.e, mil!.mk Linit value indexes 700 700 1962=100 160 600 140

500 120

100~~-~~~~,~-~~~~------~ 400 Imports c.i.f. Terms of t~ad-~"

1966 No.8, 1968 II

FOREIGN TRADE BY MAIN GROUPS Mill. mk I B It P 0 r t 8, t. o. b. I Imports, c. i. t. I I I Finished goods I I Raw : Period Agri- Round Wood Paper Metal, en- material. cultural and hewn industry industry gineering Other and pro- Fuels and products timber products products industry goods ducer lubricants Investment Consumer products I good. good. goods , I I I I 1963 164.8 112.8 8u.8 1752.2 613.8 222.6 1827·5 373·3 1004.3 661.8 1964 230·4 89.8 895.8 20I9·5 610.3 286.1 2 IIO.7 508.4 1396.2 801.2 1965 251.8 60.3 919.8 2165.6 800·3 368.2 2362.4 514.7 15u·4 876.6 1966 264.0 59·0 863.5 2297.0 877·2 456.2 2450.5 589.8 1448.5 1035.6 1967* 261·4 54·3 865.7 2384.5 1079.7 584.7 2545·9 668.2 1462.8 1 II7.5

Jan.-May 1966 124.4 12·7 245·4 885.6 292.4 141.4 936.6 195·7 I 612·7 428.4 1967* 103.1 18.6 263.5 945·2 362·4 196.4 972.0 245·9 628·7 467.5 ! 1968* 146·7 18.6 364.9 1208·4 586·3 286·5 1202.2 365.6 607·3 546.5

1967* April 30·9 5·8 56·9 187.1 72.1 44.6 203.1 54.6 128·7 100·9 May 15.0 5.2 71.6 190.0 78.1 44·5 212.2 49.0 129.7 91.0 June 24.6 5·0 85.6 175·7 II 8.5 48.1 184·6 46.3 120.6 70.3 July , 12.6 5.2 85.2 177·9 61·4 30 .5 181.6 47.8 105·1 66.2 Aug. 14-4 7·9 88.1 189.1 58.7 53.1 203.6 53·1 88.8 85.2 Sept. 19·7 4·9 76.5 194·5 1I2.1 57·9 194·1 51•8 94·6 79.8 Oct. 25·4 5·5 91·5 228.0 137·6 73·6 252.7 61·3 II9·2 108·3 Nov. 19·5 4.1 96,3 231.1 I20.2 58,7 289·0 86.1 II9·0 121·7 Dec. 42.0 3.1 79.0 243.0 108·9 66·3 268·3 75·9 186.8 n8·3

1968* I Jan. 28.8 4.0 66.2 205.4 105.7 48.5 236.1 96.0 103·4 98.8 Feb. 13·5 1.1 41.7 201·7 91.4 49·6 205·2 54·3 100·4 105.5 March 48.6 2.6 55·9 251·5 II3·6 64.5 220·4 61·3 II8.6 10 9.7 April 18·3 3-7 91·3 271·3 II8·9 53.2 246.4 65·7 127·1 II7·1 May 37·5 7.2 10 9.8 278·5 156·7 70 .7 294.1 88·3 157.8 II5·4

Inderx______-, Inde~x ______. ______. ______

Volume of exports,1962=100, seasonally adiust:d Volume of imports,1962 =100, seasonally adjusted __ Total exports -- Total imports ._._. Wood products Raw materials Paper products I .-.-. Investment good. Metal and engineering J ••••• n Consumer goods 200 200 ~ 1 I .: i 150 If- .....'. : ....:, ...... I •. , ';:.: - T""- . L- ;-: 120' ""-'-'-'1" .-'-\ ~ 100 .,,' ".'/.

Log. scale

::: 1 70 t- I l..l ~~,~,:,~ I I i i I I 1968 1966 1967 1968 1966 1967 12 No.8. 1968 FOREIGN TRADE BY COUNTRIES

Exports. f.o.b. Imports. c. i. f. -.. .------Area and country Whole year Jan.-May Whole year Jan.-May 1 I 1 .. - 1968* 1966 1967* 1 1967* 1 1968* 1966 1 1967*1 1967* 1 I 1 % % % % Mill. mk % % % % Mill. mk 8 IO St~ling area I. I' I ••••• 22.6 22.8 2I·9 22.8 595·I I6.6 I5· I6·7 I5·I 4 ·9 United Kingdom ...... , 20·5 20·9 19·7 20.6 536.7 16.1 15.2 16.2 14·6 I 397·5 Other OECD countri"es in Europe .....••..... 46.7 44;0 44.0 46.2 I 207.2 53.8 53·9 54·5 54.2 I 474-5 1.0 1.1 296 Austria ••••••• 1 1 •• 0 I. "' 0·4 0·5 0·4 0·4 10·5 0·9 0·9 Belgium-Luxembourg .... 3.·1 2.6 2·3 2·3 59·6 1·9 2.0 1.9 2.2 59·4 2 Denmark ••••••••• 1.1 I. 3·5 3.8 3·6 3·5 91·3 3·5 3·3 3. 3·5 96·3

France I ••••••••••••••• 4·5 .. 4·3 4·6 3·9 103.3 4·3 3·7 4·4 3·5 95·4 Western Germany ...... Il.O 8.6 8·4 9·7 252·4 17.0 16.2 16·7 15·5 422.9 2.0 Italy .1 ••••••••• 1 •• II "' 3.0 3.1 3·4 3·1 80.6 2.0 2·3 2·4 64~I

Netherlands 11.1 1 •••• 1 •• 5.8 5·1 5·3 4·4 II4·6 3.6 3.8 3·5 3·3 88·5 62.8 Norway ••••••••• 1 I ••••• 1·9 2·4 2.0 3·4 89·3 2.1 2·3 2.1 2·3 . I Portugal •...... 0.2 0.2 0.2 0·3 0·4 0·5 0·5 14.2 I 0·4 6·5 Spain ••••••••••••• 1.0.1 1.2 1.0 1.2 0.8 20·9 I 0·4 0·4 0.6 0·5 12·4 Sweden •••••• 1 •••• 1 •••• 8.8 9·7 9·6 II.O 286.2 14.1 15·4 15·0 15·7 427.8 I Switzerland 1 •••• 1 "' II •• 0·9 1.0 1.0 1·5 38.1 3.1 3.0 3·1 3-3 89·2 Eastern Bloc .1.1.1 ...• I8·7 2I.2 2I·5 I8·9 494-4 . I9·8 20·4 I8·3 2I·4 583.0

China •••••• I ••••••••••• 0.6 0.8 0·5 0.6 15·3 0·5 0.6 0·7 0·4 II.2

Czechoslovakia •• 11.1 I ••• 0.8 0·5 0·4 0·4 10.0 0.6 0.6 0.6 0.8 20.8 Eastern Germany ...... 1.0 0·7 0.6 0.6 17·1 0·9 0·9 0·7 0.8 22·5

Poland •••••• I. II I. II II 1·4 1·3 1.3 . 0·9 22.8 1.6 1·5 1.2 1.2 31.7

Soviet Union "' 10 •• 1 •• 1 14.1 17.1 17·9 15·8 412·3 15·5 16.1 14·5 17·7 480.7 2 6 U.S. and canada •• II "' 6.6 6.0 6·5 6·9 I79·9 4·9 4. 4. J.9 I07·4

United States .1 I' "' 11.1 6;4 5·8 6·3 6.6 173·2 4·5 3·9 4·3 3.8 103.2 Latin America ••.. I. I. 2·9 2·9 3·I 2·9 75·5 2·7 2·7 2·4 2.6 69.8 Argentina ...... 1.0 1.0 1.0 0.8 21.3 0·3 0.2 0·3 0·3 7·7

Brazil ••••••••• 1 1 •• 1 •••• 0·4 0·7 0.8 0.6 15·6 1.2 1.1 0·9 1.0 27.1

Colombia II •••••••••••• 0.6 0·3 0·3 0·3 8.6 0·7 0.8 0.6 0·7 19·9 Other •••...•••..•..•... 2·5 3;I 3·0 2·3 59·3 2.2 3·0 3·5 2.8 76.0 Grand total 100.0 100.0 100.0 100.0 2611.4 100;0 100.0 100.0 100.0 2721.6 of which EFTA countries ...... 36.4 38.5 ]6.6 40.5 I 058.6 40•0 40.6 4I.0 4I •I I II7.S EEe countries ...... 27-5 2305 24.0 23·4 6IOo5 28.8 27·7 28·7 26.8 730.3

Index Index

290 1949= 100 Oct. 1951 ~100 Log. scale Co•• ",.~ 280 220 270 210

200 250 240

230 180 220 170 210 1964 .. 65 66 67 1967 1968 1967 1968 No.8. 1968 13 PRICE INDEXES Building COlts Whole.ale price. 1949 = 100 1964 = 100 ----_.... ------.. -. --- j Origin Purpose Stage of processing Period More Wages IBuilding Total Domes- Im- Pro- Machin- Con- Raw Simply elab- I In ery & material. Total .tic ported ducer sumer processed or8tely I building Imaterials goods goods goods transport goods and com- gooda processed uade equipm. moditiea , gooda I I

1965 236 242 214 241 224 232 266 228 223 lOS 106 104 1966 241 247 216 24S 228 238 271 233 228 108 II2 104 1967 248 2S4 22S 246 241 2S3 276 236 240 II4 121 107

1967 June 243 2S0 217 242 236 247 271 231 234 II4 123 106 July 246 2S4 216 241 23S 2S4 279 230 236 II4 123 106 Aug. 24S 2S3 216 241 277 230 236 114 12 23S 2S4 3 106 !' Sept. 24S 2S2 216 241 23S 2S2 272 234 236 114 123 lOS Oct. 2S4 2S7 242 2S1 2S4 2S9 282 242 246 117 123 109 Nov. 262 264 2S6 260 262 26S 28S 2S2 2SS 119 123 III Dec. 264 26S 2S8 262 266 266 28S 2S4 2S8 120 123 II2 1968 I Jan. 269 272 2S8 26S 273 273 294 2S7 262 124 130 II3 Feb. 269 273 257 26S 273 274 290 2S7 26S 124 130 113 March 273 277 2S6 267 276 279 295 262 266 12S 130 II4 April 27S 279 2S9 270 277 281 296 26S 269 12S 130 I II4 May 27S 279 260 270 277 282 297 264 269 12S 130 II4 June 27S 279 260 269 277 283 298 26S 269 127 13S I 115

Cos t 0 f Ii v i n g Oct. 19S1 = 100 Conaumer p ric e I Oct.-Dec. 19S7 = 100

Period I Heating I Heating Total Food- Rent and aothing Other Total Food- Rent I and Clotbing Other .tuff. lighting atuff. lighting I I I

1965 178 19S 377 lIS 109 173 140 144 140 III 13S 141 1966 18S 202 392 II9 III 182 14S 149 14S II6 138 148 1967 19S 212 408 130 lIS 196 IS3 IS6 lSI 126 143 160

1967 June 194 210 403 129 lIS 194 IS2 IS4 149 12S 143 IS8 July 19S 212 407 129 lIS 19S IS3 IS6 lSI 126 143 IS9 Aug. 19S 212 407 130 lIS 19S IS3 IS6 lSI 126 143 159 Sept. 197 216 407 130 116 196 IS4 159 lSI 126 143 160 Oct. 198 217 419 130 II6 197 IS6 IS9 ISS 126 144 161 Nov. 202 223 419 132 II7 202 IS9 164 ISS 128 146 164 Dec. 20 222 419 140 118 20 IS9 16 ISS 136 147 16S I 3 3 3 ! 1968 ! Jan. 20S 223 424 141 120 207 161 164 IS7 137 149 169 Feb. 207 224 424 142 121 208 162 16S IS7 138 ISO 170 MaIch 210 231 424 142 124 210 16S 169 IS7 138 IS4 172 April 2II 234 421 142 126 211 166 172 IS6 138 IS6 172 May 211 23S 420 141 126 211 166 173 IS6 137 IS6 I 172 ! June 213 238 424 141 126 212 167 17S IS7 137 IS7 I 172 I 3 12708-68 No.8. 1968 14 PRODUCTION - INTERNAL TRADE

Index of industrial production I9S9= 100 Commer- Wholesale cial uade Total, timber volume Special indexes of manufacturing fellings Period Invest- Other adjusted index Consumer for normal 1000 Total ment producer 19$4 = 100 goods goods goods Wood Paper Metal Other seasonal piled industry Iindustry Iindustry I variations cu. m

I 1 0 0 1965 159 160 166 142 133 182 161 152 IS!) 5 9 5 17 1966 166 159 173 154 u8 191 162 165 165 46507 174 181 1967* 170 165 176 162 II9 189 163 171 170 44963

1966 Dec. 168 168 176 151 107 186 169 168, 172 3 688 200

1967* 0 Jan. 176 173 185 161 III 203 174 173 173 3 835 14 Feb. 170 175 176 159 130 187 " 175 166 171 5079 I6x March 174 181 180 165 134 196 177 168 171 5 029 177 I April 181 177 187 170 140 205 I7S 182 170 4492 191 I May 171 168 176 165 136 186 169 171 167 9435 190 June 157 159 156 160 107 157 157 163 162 2148 17S July 123 80 136 III 92 185 76 124 167 955 IS9 : Aug. 173 154 177 174 II3 196 ISS 182 171 1978 189 Sept. 176 170 181 171' 117 197 168 180 167 2488 197 Oct. 190 191 194 182 120 202 187 196 173 3 166 223 I Nov. 18 184 192 171 122 188 18 190 173 2969 184 I 4 3 I Dec. 164 168 171 149 108 ' 171 165 162" 176 3389 182 i 1968* i Jan. 179 176 187 165 II9 201 177 173 175 3509 137 Feb. 178 181 186 163 133 200 181 172 172 4977 IS8 March 186 185 195 171 135 212 184 183 173 4 898 164 April 177 168 183 167 140 192 170 179 178 4384 174 I May 185 174 192 177 142 207 175 190 175 10 33 1 188

'nd8x,.------'---r--·­

Tatal index of industrial production, 1959=100 , 190

180

1964 1965 No.8. 1968 IS BUILDING-WAGES-TRANSPORT-EMPLOYMENT Index of salary and wage earners' earning_ Buildings completed, mill.cu.m Buildings 19S7 = 100 _. under construe- Period Commer~ tion at end All wary Wage earners in Total Dwelling Farm cial and Official of period and wage houses buildings industrial buildings mill. cu. m earners Agri- Manu- premises culture .1 Forestry Ifacturing

1965 27.04 10·96 2.58 9·20 3·12 31·31 180 177 192 176 1966 26·54 II.26 2.80 8.19 3·00 36.34 192 197 200 190

1967* " ...... 207 215 217 207

1966 Oct.-Dec. 9·92 4·61 1.16 2·91 0.83 35·40 198 200 207 195 1967* Jan.-Mar. 6.12 2·47 0.31 2.66 0.50 32 .67 201 . "207 196 201

Apr.-June' " ...... 207 216 230 206

IJuly-Sept. " ...... 209 213 229 210

Oct.-Dec. " ...... 210 222 232 210 1968* Jan.-Mar...... 221 223 " I " I 230 239 I

Railways Foreign sbipping Labour input Unemploy·mc,nt Period Good. trucks loaded Vessel. arrived I Vessels departed 1000 % of Thousands with cargo -- 1 000 net reg. tons man-months ~otal labour force - 1967 I 1968* 1967* I 1968* I 1967* I 1968* 1967* I 1968* 196'7* I 1968*

Jan. 123 II4 840 885 692 772 1856 1792 3·1 5.8 Feb. 125 II5 615 723 502 60 3 1846 1772 3·1 5·3 March 133 IZ9 756 777 627 687 1834 1767 2.6 5·0 April 140 128 834 995 676 767 1853 1763 2·5 4.8 May 129 IZ5 I II9 1 233 972 1109 1918 2.1 June 124 103 1386 1466 1240 1263 1883 2.1 July u6 I5H 1390 1656 2.2 Aug. 130 1436 1371 1791 2·4 Sept. 126 1240 1063 1880 2.6 Oct. 136 1169 936 1906 3·3 Nov. 127 1090 897 1889 3·9 Dec. 105 1039 870 1835 4·3

Indexr------·------, I Index Some indexes of industrial production adjusted for seasonal variations. 1959= 100 I ! 220 j 200 ~180 i 160 ] .140

120

1966 1967 1968 1966 1967 1968 16 No.8, 1968 EXPLANATIONS RELATING TO THE STATISTICAL SECTION

PRE-I963 VALUES ARE GIVEN IN THE· NEW BALANCE OF PAYMENTS MONETARY UNIT, ONE NEW MARK BEING EQUIV­ ALENT TO ONE HUNDRED OF THE OLD MARKS. Page 9. Figures are calculated by the Bank of Finland Insti­ tute for Economic Research. In addition to the Board of Cus­ BANK OF FINLAND toms figures, exports include grants in kind but exclude steve­ Page 3. The items of the statement of the Bank of Finland doring expenses and imports inciude seamen's duty-free im­ are described in Monthly Bulletin No. 10, 1955, p. 2S. ports, non-mOnetary gold, grants in kind and adjusted allowance Page 4. Since Dec. 31, 1965 Gold and foreign .xchang. - for smuggling. Gold (valued on basis of the par value of the mark) + IMF gold tranche + Foreign exchange. Other forBign ,"s.rs - Foreign billa + Foreign bonds. Otlln for.ign liabUirks - Mark accounts FOREIGN TRADE of holders abroad + Foreign term liabilities. Tr.,"ur~ hills and Pages 10-12. Fillures supplied by the Board of Customs. "onds: Including Treasury bond loan + Treasury bill covering Th. unit "alu. index., (p. 10): The indexes are calculated certain IMF and IBRD accounts (included in Other claims). according to the Laspeyres formula. At the end of the year Otlln claims, net ~ Advances for stand-by stocks - Export the arithmetic mean of the Laspeyres indexes corresponds to levies (net). For.ign .xchang. nlUOt.ion: Gold holdings are the annual level of the Fisher index formula. Terms of trade: valued on basis of the par value of the mark. Gold tranche the ratio of export indexes to import indexes. Figures in dia­ position measures that part of Finland's quota which may be grams (PP. IO and II) are seasonally adiusted excl. unit value drawn essentially automatically In convertible exchange against index figures. For.ign trade by countri" (P. 12): imports by payment in marks. countries of purchase. exports by countries of sale. Pace 5. Oth.r ad"ane.. - Inland bills In foreign currency + Cheque accounts (assets) + Other claims excl. Treasury's IMP and IBRD bill and Advances for nand-by stocks. Lia­ PRICE INDICES hilirks = Other cheque accounts + Other sight liabilities + Page 13. All indices calculated by the Central Statistical Finnish term liabilities - Account of the Mortgage Bank of Office. Finland Oy. - Cuh reserve accounts. - Export levies (net). Diagrams. Left: N.t claim, on other than "ankI - Net foreign assets + Net claima on the Treasury + Net claims on the rest of PRODUCTION - INTERNAL TRADE economy + Finnish bonds + Finnish coin - Equalization Page 14. Ind.x 0/ industrial production calculated by the accounts = Notes in circulation + Bank's own fund. - Net Central Statistical Office. The grouping by branches of industry claims on the banks. is in accordance with the international nomenclature (ISIC). The DEPOSITS BY THE PUBLIC- seasonally adjusted series is calculated by the Bank of Finland In­ ADVANCES TO THE PUBLIC-MONEY SUPPLY stitute for Economic Research on the basis of the index of indus­ Commercial bank and mortgage bank figures obtained from tria1 production per working day according to a method resem­ the official bank statistics, savings bank figure. from the Central bling the U.S. Bureau of Census Method II. Commodities ac­ Statistical Office, other figure. from the respective credit insti­ cording to use: investment goods weight 1403, other producer tutions or their central banks. goods weight 57.0 and consumer goods weight a8.7. Special Page 6. Ch.,," accounts in all cr.dit instirutions relates to manufacturing indexes: wood industry ISIC no. 25, weight 6.6, commercial banks, savings banks, co-operative credit societies, paper industry no. 27. weight 13.1, metal industry nos. 34-38, and mortgage banks. Tnm d.polits in all cr.dit instirutions weight 23.5, and other manufactures nOl. ao-Z40 26, 28-33, inciudes a small amount of deposits in mortgage banks. Index­ 39. weight ",0. Comm.rcial tim6er f.lJing, compjled by the ti.d d.posits and high-int.r.st d.polit. are included In term Ministry of Communications and Public Works. Since July 1965 depoaits. figure. have been adjusted by the Bank of Finland Institute for Page 7. Mone~ supp/~ - Finnish notes and coins in circula­ Economic Research. Whol.,al. trad. "Diu",. index calculated by tion - Finnish notes and coins held by the banks + Cheque the MiDistry of Finance. accounts of the public + Postal giro accounts of the public STATE FINANCES BUILDING - WAGES - EMPLOYMENT - TRANSPORT Page 8. Official figure. computed by the Economic Depart­ Page 15. Building figures supplied by the Central Statistical ment of the Ministry of Finance. First date of publication: Office. Index of lalar~ and gag•• arner,' .arnings calculated by Bulletin No.8, I968. Revenue and expenditure: Extra-budge­ the Central Statistical Office. Beginnina 1957, the weights em­ tary funds and the aggregated net Current deficit of State enter­ ployed are determined according to the structure of total prises are included. Figures are reported on a cash payment earningII in 1957; for 1954-1956, the weights are in accord­ basis. Graphs on p. 8 are still drawn from the figures computed ance with earnings in 1951. Rai/wlIJI figures supplied by by the Bank of Finland Institute for Economic Research. Debt: the Board of RaIlways. Shipping figure. supplied by the Ship­ Official figures adjusted by the Bank of Finland Institute for ping Board. Labour inpur and Im.mplo~ment figures supplied by Economlc Research. Nominal values of index-tied bond loans. the Labour Research Bureau of, the MiDistry of Communica­ Cash debt (net) = net debt to the Bank of Finland plus short­ tions and Public Works, both based on the labour force sample term debt to the Post Office Savings Bank minus cash holdings survey. Labour input represents the estimated average number (net) of State departments. of days worked. (See articie in No. 10, 1960 of this Bulletin). ----- SYMBOLS USED

* P.reliminsry 0 Less than half the final digit shown • Logically impossible .• Not available _ Nil A line drawn across a column between two consecutive figures indicates that the figl1res above and below the line are not stricti- comparable. • No.8, 1968 17 SOME PARTICULARS ABOUT FINLAND

FORM OF GOVERNMENT en. ft), of which pine 43 % and spruce 38 %, the rest 19 % From 1154 to 1809 Finland formed a part of the kingdom being leaf-trees, chiefly birch. Of the growing stock 13 300 of Sweden. It then became an autonomous Grand Duchy million cu. ft, S6 % of them pine, was up to the standard required connected with Russia until December 6, 1917. the date of for logs. The annual growth il 43 Inillion solid en. m green wood Finland's declaration of independence. The republican constitu­ exc!. bark (I S19 Ini11. cu. ft). The total removal in 1963 calculated tion was adopted in 1919. The legislative power of the country according to the ule of wood was SI million cu. m excl. bark i. vested in Parliament and the President. The highest execu­ (I 81S million cu. ft). tive power is held by the President, elected for a period of 6 . AGRICULTURB (I960): Cultivated land 2.6 million years. The President for the current period, March I, 1968, to hectares of Which hilldings of less than S ha. amount to 17 %. March I, 1974, is Urho Kekkonen. S to IS ha. 48 %, IS to so ha. 30 % and more than So ha. S %. Parliament, comprising 200 members, i. elected by universal Number of holdings 388 000, of which 184 000 are of more .uffrage for a period of 4 years. The number of leats of the than S ha. Index of agricultural productioD 137 for I96S (I9S4 different parties in Parliament elected in 1966 were as follows, - IOO). Measure of self-sufficiency in bread cereals 91 % in numbers in brackets indicating present state of parties: Social the crop year I964/6S. . Democrats 55, Centre Party 49 (50), People's Democratl 41 INDUSTRY (1965 I: Gross value of industrial production (42), Conservatives 26, Swedish Party 12, Liberal Party 9 (8). 19 400 Ini11. marks. number of workers 3S2 SOO, salaried employees Social Democratic League 7 (6), and Finnish Farmers' Party I. 80800. motive power (196S) 4.0 mill. kW. Index of industrial production IS9 for 1965 (I9S9 - IOO). LAND RAILWAYS (Jan. I. 1968): Length 5636 km. of which THE AREA is 337000 square kilometres (Great Britain', S 607 km are State and 29 km private railways. area i, 24S 000 sq. km and Italy's area 301000 Iq. km). Of MERCHANT FLEET (June 30, 1968): Steamers 86 the total, inland waters form 9.4 %. On an average IS.8 % (134052 gross reg. tons), motor vessels 409 (925379 gross reg. of the land in the South of Finland is cultivated (1960), 2.3 % tons), sailing vessels with auxiliary engine. 16 (2350 gross reg. in the North and 9.2 % of the land as II whole. Of the land area tons). Total SII (1061781 gross reg. tons I. 21.8 mill. ha (53,9 mill. acres). or 71.3 %, are covered by foreltl. MOTOR VEHICLES (Dec. 31. I967): Passenger can OWNERSHIP OF LAND (1960): The total land area was 5S1 200, lorries and vans 92 900, buses.7 400, others 4200. Total distributed among different classes of owner. approximately 6SS 700. .1 follows: private 60.9 %, State 31.8 %, joint stock companies SCHEDULED AIR TRAFFIC OF FINNISH COMPA­ etc. S. 6 %, municipalities and parishes 1.7 % NIES (1967): Kilomeues flown IS.7 million, passengers carried 897 60S, passenger kilometres 4S5.0 million. and ton kilometres POPULATION of frcight and mail 7.5 million. NUMBER OF INHABITANTS (1966): 4.6 million. Sweden 7.8, Swit2eriand 6.0, Denmark 4.8 and Norway 3.8 million. DENSITY OF POPULATION (1967): In South Finland FINANCE AND BANKING 26.0, in North Finland 4.3 and in the whole country an average CURRENCY. Since 1860, Finland has had its own monetary of IS.3 inhabitants to the square kilometre. system. From 1877 until 1914 the country was on the gold DISTRIBUTION BY AREA (1967): 52 % of the popula­ standard, and retumed.to it in 1926. In 1931, the Central Bank's tion inhabit the rural areas, 48 % towns and urban districts. duty to redeem bank note. in gold was suspended and at the The largest towns are: Helsinki (Helsingiors), the capital·S28 300 end of 1962 was entirely cancelled. The monetary unit is the inhabitants, Tampere (Tammerfors) ISO 200, Turku (Abo) mark (Finnish tnarkka). From Oct. 12, 1967, the par value of 148 100. the mark has been changed from 0.27771 grams of fine gold per OCCUPATIONS (1960): Agriculture and forestry 32 %, mark (equivalent to 3.20 marks per u.s. dollar) to 0.2II59 grams industry and construction 31 %, commerce 9 %. transport and of fine gold per mark (equivalent to 4.20 marks per U.S. dollar). communications 7 %. services II %. econoInically inactive Finland has been a member of the International Monetary independent persons II %. Fund since I948. LANGUAGE (1960): Finnish speaking 92.4 %, Swedish MUNICIPAL FINANCES. In the finance accounts for speaking 7.4 %, others 0.2 %. 1966 expenditure amounted to 4 lIS mill. marks. Total revenue EDUCATION (1967): Practically all persons over IS years was 4 141 million, of which income from taxation 2 133 miUion. of age are literate. There are 6 universities (the oldest founded in The municipal income tal< (non-progressive) averaged 12.4S % 1640), 6 colleges of university standard, and 2 teacher training of the ratepayers' taxable income. colleges, besides teacher training departments in two of the uni­ THE CENTRAL BANK. The Bank of Finland function. versities. under the guarantee and supervision of Parliament. Its Board of INCREASE OF POPULATION (1966): births 16.7 ./.. , Management i. appointed by the President of the Republic; the deaths 9.4 '/." increase 5.4 '/••. Death. in France 10.7 ./•• and Bank Supervisors, nine in number, are elected by Parliament. The Great Britain II.8 '/••. Bank has a head office in Helsinki and 12 branches in other towns. 6 TRADE AND TRANSPORT OTHER CREDIT INSTITUTIONS (Dec. 31, I9 7). NATIONAL INCOME (I966. in Ini11ion marks) Grosl There are two big and four small commercial banks with In all domestic product at factor cost by indusuial origin: agriculture 809 offices, 353 savings banks, 479 cooperative CIedit societies and their central bank, six mortgage locieties, and POSB. The :I 144 (9 %). forestry and fishing I 843 (8 %). manufacturing 7203 (29 %), construction 2406 (10 %), transport and lavings departments of the cooperative stores accept deposits communication 1798 (7 % I, commerce, banking and insurance from their members. The National Pension Institute and sixty­ four private insurance companies allo grant creditl. 3 3 (13 %), public administration I 073 (4 %), other services 26 RATES OF INTEREST (June I, 1966). Bank of Finland 4 898 (20 %), total 24 628. Index of real domestic product 170 discount rates 6-7 Y. %. Other credit institutions: term deposits (19S4 = 100). . 4 FOREST RESOURCES (1960-1963): The groWIng smck * %. 12 months' deposits 6 %, 100 per cent index-tied depos­ ita 3 %; highest lending rate 10 %. comprised I 410 million of solid cu. m incl. bark (49 797 million PUBLIC FINANCE IN 1967

BY HENRI J. VARTIAINEN, D. Pol. Be. HEAD OF DEPARTMENT OF THE BANK OF FINLAND INSTITUTE FOR ECONOMIC RESEARCH

The majority Government appointed to expenditure, which introduced an element of office ill the spring of 1966 declared its fiscal instability to the daily management of the policy approach in the preamble to the budg­ Treasury. et proposal for 1967. It was emphasized that To make both ends meet with less resort restraint in Government expenditure was to borrowing than hitherto, it was necessar~" necessary in order not to add to the demand to raise several taxes. The personal income pressure which was troubling the balance of tax rates were raised in higher brackets. The payments. Restraint was to be exercised, property tax for individuals was raised by however, in such a way as not to aggravate about 26 per cent and the company income the employment situation nor hamper invest­ tax rates were raised from 42 to 47 per cent ment opportunities. Secondly, the intention for distributed and from 48 to. 49 per cent was to bring about an equilibrium in State for undistributed profits. The sales tax which finances without resort to excessive borrowing had amounted to 10 per cent of the value of or to exceptional and temporary stabilization sales was marked up by 1 percentage point. measures. For several years now State Railway and postal tariffs were likewise expenditure had been showing a tendency to increased as well as the interest charged on grow faster than State revenue. The excess loans granted by the State. The yields of the of expenditure had necessitated stabilization duty on liquid fuel -and the tax on tobacco measures, dictated mainly by consideration of could also be estimated to increase, because the Treasury's liquidity position. At the same these charges had been raised in the middle time both long and short-term borrowing had of 1966. A new feature of taxation was the increased greatly. At the end of the 1950's imposition of a fiscal duty on certain insur­ long-term borrowing had financed about 5-6 ance policies. Changes in tax rates Were per cent of the expenditure, but this figure estimated to produce an extra 550 million was already 12 per cent in the years marks in revenue. 1964-66. Internationally speaking, this is On the expenditure side, it appeared that by no means an extreme, and the amount of an increase could not be avoided in the public debt is still fairly modest, 12 per cent consumption and transfer accounts, although if compared to GNP and about a half in some charges previously borne by the State comparison to the annual State expenditure. were partly transferred to the private sector However, the short-term debt of the Treasury and local authorities. Outlays on investment, had at the same time grown from a level of on the other hand, were planned to be about 100-200 million marks to a level of 500- the same as in 1966. This was partly an 600 million marks or 7-10 per cent of the outcome of the new views emerging on em- No.8, 1968 19 ployment policy. Instead of an automatic As the tax payment certificates of 1966 expansion of public works to absorb the fell due in lVIay, the State had to grant a unemployment an attempt was made to limit new tax exemption on one and two-year these works to projects which were deemed bonds for 120 million marks in order to sound from the economic and the national meet this obligation. In addition 70 million yiewpoint. The excess unemployment was to marks in bonds were obtained from the be met by temporary unemployment compen­ Post Office Savings Bank during the first sations. Finally, the proposal included the half-year. In January the State had drawn first steps outlined in a law of 1966 concern­ the rest, or 95 million marks, of the 300 ing a programme to develop the institutes million mark loan granted by the Bank of higher learning during 1967-1981. of Finland to the Treasury in December As finally approved the budget amounted 1966. to 7 816 million marks, which was 9 per cent The growth of expenditure slowed down more than the expenditure in 1966 according temporarily during the third quarter of the to the closed accounts. year; the excess over the previous year in January-September amounted to 9 per cent During the first quarter revenue was 16 only while the revenue continued to grow at per cent and expenditure 14 per cent higher the 10 per cent rate. The income tax yield than one year previously. The cash deficit of had grown by 14 per cent and that of the 63 million marks was only half of the cor­ sales tax by 18 per cent. The yield of import responding 1966 figure. By the end of June, duties, on the other hand, was down by 13 the accounts were approximately balanced. per cent; the growth of imports had been During the first half-year the revenue ex­ checked by the restrictive monetary and ceeded the 1966 amount by 10 per cent while fiscal policy, and the annual reductions in the corresponding figure for expenditure was the EFTA duties made the yield actually 12 pel' cent. The growth in revenue concen­ fall. Liquor prices were raised in July. trated on indirect taxes as the slow rate of Two more supplementary budgets totalling economic growth retarded the expansion of 355 million marks were passed in the latter the income tax base. half of the year. The greater part of these By the end of June, the expenditure on funds was needed for employment purposes real investment was slightly less than in as it turned out that the previous funds ·were 1966. Though the rate of unemployment was clearly insufficient. The October devaluation rising there were less people employed in also caused some nominal increases in foreign public works; correspondingly the number of liabilities. Altogether 8 241 million marks of people receiving unemployment compensation expenditure was budgeted in 1967; this was multiplied. New appropriations for em­ exceeded the 1966 budgeting by 11 per cent. ployment purposes were granted in the sup­ In October the tax on tobacco was raised plementary budget of 68 million marks in again and the Export Levy Act came into ,Tune. force, while in November an airport fee to be In order that the various investment paid by passengers was introduced. The ratio alternatiYes should compete on a more equal of expenditure to revenue improved in the basis, State bonds previously tax-free were last six months compared to 1966. There was now subjected to income and property tax a surplus of 105 million marks in the end of on a half of the yield and capital. This September and a deficit of 94 million marks reduced the demand for them considerably. by the close of the year. 20 No.8, 1968

Table 1. STATE REVENUE AND EXPENDITURE (Adjusted figures) Revenue Expenditure 1966 1967 1966 1967 Million marks Million marks Income and Property taxes (net) 1 544 1 699 Interest on State debt ...... 180 216 Gross receipts ...... (4397) (4979) Child allowances ...... 300' 310 Refunds and local authorities (-2853) (-3280) State ,share in national pensions 274 305 Other direct taxes ...... 36 39 State share in national health Sales tax ...... 1 462 1 745 insurance ...... 34 35 Import duties ...... 508 466 Net loss of State enterprises .. 54 57 Revenue bom Alcohol Monopoly 505 539 Compensation to war-disabled .. 145 160 Excise duty on tobacco ...... 359 404 Net price equalization payment 59 74 Excice duty on sweetstuffs .. 44 43 Subsidies ...... 623 643 Excise duty on beer ...... 21 24 State ,aid to agriculture ...... 72 96 Excise duty ·on liquid fuel .. 445 477 State aid to Local authority and Tax on automobiles and motor private schools ...... 534 617 cycles ...... 167 167 Military expenditure ...... 337 387 Tax on motor vehicles ...... 47 74 Maintenance of roads ...... 177 186 Other excise duties ...... 43 96 Pensions -of State employee~ .. 19·3 228 Stamp duties ...... 176 179 Other current expenditure ....__ 1_99_8 ___ 2_10_7 Employers' child allowance Current Expenditure ...... 4 980 5 421 payments ...... 451 486 Other revenue ,similar to taxes 99 97 Investments in State enterprises, ------forests, and real estate ...... 314 328 Total taxes 5 907 6 535 Purchase of machinery and ap- paratus ...... 101 82 Housing ...... 267 331 Interest and dividends ...... 117 152 Roads, bridges, and hydro-plants___ 5_6_2 ___ 5_8_5 Other current revenue ...... 226 i92 ------Real investments 1 244 1326 Current Revenue ...... 6 250 6 879 Loans granted ...... 357 383 Purchll;8es of shares ...... 55 83 Provision for depreciation by Purchllises of shares of ,the in- State enterprises ...... 55 60 ternational monetary institu- Sales .of State property and tions ...... 24 5 other capital revenue ...... 3 o Increase in inventories of extra- Redemptions of loans ...... 116 122 budgetary funds etc. ••...... 19 35 Decrease in inventories of State ------en terprises ...... 29 Capital Expenditure ...... 1 699 1 832 ------Capital Revenue ...... 208 182 Total Expenditure ...... 6 679 7 258 Total Revenue 6458 7061 Redemption of external loans .. 90 70 Redemption of internal loans 534 416 Redemption of Indemnity Bonds External loan.s ...... 90 156 etc...... 1 1 Internal loans ...... 853 446 Index premiums ...... 15 17 ------Loans ...... 948 602 Redemption ...... 640 504 Surplus ...... ---::;77;;---- Deficit ...... ------94 Total 7 896 7 757 Total 7896 7757

FINANCE ACCOUNTS Excluding the loan transactions, the excess of expenditure over revenue was 34 million The final figures for State revenue and marks smaller than in 1966. Net borrowing, expenditure are given in Table 1. The in­ however, brought in 205 million less funds crease of the figures over the previous year than in the previous year thus effecting a is seen to be 9 per cent. As the rise in the cash deficit - as measured by the change price level amounted to some 6 per cent, the in short-term assets and liabilities - of 94 growth of State finances in real terms million against a surplus of 77 million marks amounted to about 3 per cent. in 1966. No.8, 1968 21 Fairly large increases· were recorded in by 7 per cent to 383 million marks. New the yields of the income and property tax loans granted to housing construction increased and the sales tax. According to national by 26 million marks or 20 per cent while income calculations, labour and capital income loans from the Fund for the Development rose by 7 per cent in nominal terms. The of Farming (previously called the Settlement gross amount of tax advance payments col­ Fund) decreased sharply. The expenditure of lected rose by 16 per cent but some refunds 79 million marks (71 million in 1966) on the and transfers to local authorities reduced the Saimaa Canal brought its reconstruction growth of the net yield to 12 per cent. Rate close to completion. The greater part of the increases account for the rises in the yields 83 million outlay on purchases of shares was of the sales tax and the duties on tobacco used for the Rautaruukki iron works. and liquid fuel. The tax yield on automobiles Net long-term borrowing (excluding indem­ did not grow, notwithstanding a considerable nity transactions) amounted to 60 million step-up of rates in July 1966, as the number marks (31 million in 1966) by the end of of imported passenger cars fell by 16 per June and to only 116 million (319 million) cent. Growth was considerable in the item marks by the end of the year. The gross "Interests and dividends" because many amount of new loans came to 602 million interest rates had been raised. marks, of which external loans were 156 On the expenditure side no items were million. The breakdown of the borrowing by allowed to expand unduly; for instance, the source was as follows: growth in agricultural subsidies amounted to ] 966 1967 3 per cent only as the raising of agricultural Million marks income was passed on to the consumers in Bank of Finland...... 231 115 the form of rising prices. An expanding field Post Office Savings Bank ...... 97 109 Other banks ...... 16 ] of operation proved to be education, as State National Pensions Institute ...... 5 .5 Insurance companies ...... 47 68 aid to local authority and private schools Public and other sources ...... 457 148 grew by 16 per cent. This was closely Domestic borrowing 853 446 followed by the 15 per cent increase in Foreign creditors ...... 90 156 military expenditure, which had been de­ Total borrowing 943 602 creasing the previous year and which was now regaining its original trend. In spite of the tariff increases, the net deficit of Statc It can be seen that the share of the Post enterprises was not reduced. This was due Office Savings Bank was about the same i.a. to the increases in the running expenses while private banks bought no bonds. Insur­ of the railways and to the diminishing sales ance companies added to their share while proceeds of State Forestry. sales to the public dropped sharply. The The growth in real investment expenditure Bank of Finland figures include subscrip­ was modest, only 6-7 per cent. As explained tions to the Forestry Improvement bonds previously, this could be viewed as a result which the Bank resells to other banks and of the employment policy. On average, 3 000 insurance companies. - In all, domestic bor­ workers less were now employed in State rowing from the private sector (excluding works than in 1966. Taking into account. the the central bank) was in fact a net redemp­ rise in prices, there was a decline in the tion of about 100 million marks. volume of land and waterway construction. As to foreign loans, the Treasury sold a The amount of new loans granted increased bond loan of 12 million dollars on the No.8, I968 22 Western European capital markets. In Sep­ expenditure was a practical question. Since tember, a bond loan of 15 million dollars the book-keeping was not yet mechanized and was issued in the United States. The High­ since the expenditure was itemized in accord­ way loans granted previously by the IBRD ance with an administrative classification, were drawn to the amount of 15.5 million the usual method was to pick out certain dollars. significant and easily identifiable items, like The composition of the deficit is explained subsidies to agriculture or State aid to ele­ in Table 2. mentary and secondary schools, leaving a considerable bulk residual to represent the general trends of current administrative Table 2. SHORT-TERM FINANCING (Adjusted figures) expenditure. 1966 1967 Million marks In recent years the budgetary system as Private funds (decr. .+) _...... + 1 .+ 3 well as the book-keeping and accounting Net debt to Bank of Finland (decr. .+ ) . _...... ____ . . . .+ 28 - 33 methods have been subjected to a thorough Short-term debt to Post Office process of revision (see Bulletin No.6, 1968). Savings Bank (incl'. -) .. _ . .. - 56 - 34 Other short-term debt (decr. .+ ) .+ 68 - 33 The structural reform of the budget was Ca~h holdings (incl'. '+) ...... +::\Ii .+ 3 partly effected in the 1967 and continued in Surplus ('+), Deficit (-) ...... + 77 - 94 the 1968 budgets. The former distinction between the current and the capital budgets Short-term debt to the Post Office Savings was abolished and capital appropriations Bank grew by 34 million marks during the were transferred to the head which previ­ year. ~et debt to the Bank of Finland ously contained the current outlay of the increased by 33 million marks and, taking department or agency in question. The basic into account the drawing of the 1966 credit, division of expenditure according to the ad­ it can be stated that the position of the treas­ ministrative field was retained. However, ury in relation to the central bank weakened new information is provided by grouping the by 128 million marks_ items also according to their economic nature into consumption, transfer, investment and other expenditure. At the same time, the THFJ FUTURE OF TIME SERIES ON STATE accounting procedures have been developed FINANCES and the data are automatically processed by Calculations concerning the State finances the computers. on a cash basis have been performed by the The reform means that the classification Bank of Finland Institute for Economic used in the Bank of Finland calculations is Research for almost thirty years, the period no longer readily available and that these covered going back to 1938. Each fiscal year series have lost much of their former signifi­ has been commented on in a Bulletin article cance, compared to the information now similar to this one. Monthly figures on the emerging_ At the same time the appropriate same basis started to be published at the fiscal authorities are assuming the responsi­ beginning of 1955. bility for the current information to be The breakdown of revenue and expenditure published. Consequently, the present combi­ into current and capital accounts conformed nat.ion of figures will no longer be computed to the budgetary structure and fiscal concepts and published. These are to be replaced by then prevailing. The detailed break-down of informat.ion supplied by the Economic De- No.8, 1968 23 partment of the Ministry of Finance, whose summarizes the Ministry of Finance calcu­ figures are to be available on both annual lations of expenditure: and monthly bases; they will replace the 1966 1967 former monthly series on page 8 of this Million marks Bulletin (see also item on changes in the Consumption expenditure 1824 2068 Statistical tables), and will also be published Transfer 2959 3219 Investment " 1717 1786 in the monthly "Bulletin of Statistics" of Other " 873 894 " the Central Statistical Office; in the past Total 7373 7967 they have appeared in the Economic Surveys prepared twice a year by the Ministry. The two series are not directly comparable It can be seen that the level of expenditure to each other because of different starting­ in 1967 is higher in these calculations than points and differing methods of netting or in Table 1. The rates of growth are cor­ grossing various items. The following table respondingly different. ITEMS

Board of lVIanagement of the Bank of and with her recognized neutrality; the Finland. The Regulations for the Bank of Finnish Government also notes that, according Finland have been amended by an Act issued to the Convention, the decisions of the Or­ in June 1968; the Board of Management now ganization will be binding on Finland on her comprises five members in addition to the own accord only and that the rules and aims Chairman instead of four as previously. of the OEOD do not limit Finland's oppor­ On July 26, the President of the Republic, tunities to develop her trading relations with on the suggestion of the Bank Supervisors countries outside the OECD. of the Parliament and following the proposal of the Cabinet, appointed Dr Heikki Val­ vanne, Director of the Bank of Finland, a Member of the Board of Management as Helsinki borrows DlVI 50 000 000. An from August 1, 1968. Dr Valvanne has served agreement concerning the issue of a bond loan as an Acting Member of the board since 1964. of DM 50 000 000 was signed in Frankfurt on Main on July 10, 1968, between the city of Helsinki and an international banking con­ sortium formed by Commerzbank ..Aktien­ Finland joins OECD. On July 23, the gesellschaft, Dusseldorf, Kansallis-Osake­ Council of the Organization for Economic Pankki, Helsinki, Dresdner Bank ..:l.ktien­ Co-operation and Development (OECD) gesellschaft, Hamburg, Banque Lambert invited Finland to become a Member of the S.O.S., Brussels, Kredietbank S.A. Luxem­ Organization, in accordance with Article 16 bourgeoise, Luxembourg, Svenska Handels­ of the OECD Convention. The Finnish banken, Stockholm, and S.G. Wartburg & Co., Government, on the same date, accepted this Frankfurt on Main. invitation subject to Parliamentary approval The currency period is 15 years. The bonds and ratification. The acceptance by Finland will be redeemed after a three-year illterYal by of the obligations of membership was quali­ instalments on each JUly 1 of DM 4 000 000, fied by certain remarks and reservations of except during the last two years of the loan a technical nature, pertaining, i.a. to the when the instalments are DM 5 000 000. The Codes of Liberalization of Capital Movements rate of interest is 7 pel' cent, payable semi­ and of Current Invisible Operations. The annually. The price of issue is 98 % per cent. Delegate for Finland, Mr. Tankmar Horn, This is the second foreign bond issue by Under-Secretary of State, stated on the same the city of Helsinki after the war. The first occasion that in acceding to the Convention one was made in 1965 in the United States on the OEOD the Finnish Government does and amounted to $ 10 000 000. not commit itself to anything that conflicts with the foreign policy pursued by Finland * No.8, 1968 25 Domestic bond issues. The Government 1856. In conformity with the peace treaty has recently announced the 1968 II issue of concluded after the World War II a part of employment bonds amounting to 32 271 000 the canal remained the territory of the Soviet marks. The issue of this new loan is due to Union. In August 1963 an agreement was the fact that a corresponding amount of signed on the restoration and use of the index-tied employment bonds, of which 33.7 canal, by which the Soviet Union rented an million marks were issued at the beginning area of 1291 ha to Finland for 50 years and of the year (see Bulletin No.1, 1968), still Finland undertook the modernization. The remained nnsold, when the sale of the loan reconstruction was started in 1963 and was stopped on March 20, in accordance with completed in summer 1968, the building costs the stabilization agreement. The maximum amounting to slightly less than 300 million amonnt of the first loan has at the same marks. The length of the waterway is 57 km, time been reduced to the amount sold, i.e. of which the excavated channel forms 43 km , 11 429 000 marks. the part of the canal on Finland's side beinD'., The nmv bonds are dated August 1, 1968 some 33 km long. There are eight locks in and will mature in ten years. The rate of the canal, the lifts of which vary from 5.54 interest is 8 14 per cent and the loan is to 12.68 m, and the total head from Lake issued at par. Saimaa to the sea level is approximately The Government has authorized the Real 75 metres. There will be about 600 kilo­ Estate Bank in Finland Ltd to make two metres of channel in the Saimaa watercourse with a depth of 4.2 m. The canal may be private bond issues of 10 and 4 million marks used by ships with a maximum length of respectively. The bonds of the bigger issue 78 m, beam of 11 m, and a draught of 4.2 m, will be dated September 1, 1968 and will run and with a tonnage of about 500 gross for a period of 10 years at a rate of 8 per register tons. It is estimated that initially ('cnt per year. The smaller loan will be current traffic in the canal will be about 1000000 for a period of five years starting from tons annually. The most important com­ September 15, 1968. The rate of interest is modities which will be transported by the 7 % per cent. Both loans are issued at par. canal are solid and liquid fuels, paper, pulp '1'he Government has also authorized the and round timber. The canal will also be Land and Industry Real Estate Bank Ltd to used by passenger vessels. It is estimated make two bond issues of 10 and 4 million that navigation in the canal will be possible marks. Both loans will run for a period of for 225 days a year on average. Trading five years starting September 15, 1968. The vessels of third countries are also to be rate of interest on the bigger loan is 8 14 allowed to use the canal. per cent and on the smaller one 7 % per cent. The loans are issued at par.

Changes in the Statistical Tables. The The inauguration of the Saimaa Canal. figures for Government revenue and expendi­ The renovated Saimaa Canal, which connects ture, based on official returns and adjusted the inland lake area of Saimaa with the Gulf by the Bank of Finland Institute for Eco­ of Finland, was inaugurated on August 5, nomic Research, have been published in this 1968. The original canal was completed in form since 1955. Due to a revision of the 26 No.8, 1968 Finnish budgetary system these series are which classifies expenditure and revenue discontinued from 1968 onwards (see Bulle­ according to their economic nature. In this tin No.6, 1968, "Development of the Finnish issue, only figures for 1967 are published. Budgetary System", and the article on Public Monthly figures for 1968 will appear in Finance in this issue). They are replaced by subsequent issues. The Ministry of Finance a new series supplied by the Economic will later provide information also on the Department of the Ministry of Finance, public debt. BANK OF FINLAND

BOARD OF MANAGEMENT

MAUNO KOIVISTO, Governor (Absent as Prime Minister)

REINO ROSSI. ESKO K. LEINONEN Acting Governor

A. SIMONEN AHTI KARJALAINEN (Absent as a member of (Absent as a member of Government) Government)

HEIKKI VALVANNE JOUKO J. VOUTILAINEN ad into

DIRECTORS

JOUKO J. VOUTILAINEN TIMO HELELA

SECRETARIES

PERTTI T AMMIVUORI K. IGNATIUS

PAULI KANERVA

HEADS OF DEPARTMENT

C. G. SUNDMAN, P. BLOMQUIST, Foreign exchange Central Accounting (trade)

P.-E. OSTERLUND, A. KAJANTIE. Foreign exchange Internal Audit (services)

HELGE LINDSTRt)M, A. NENONEN, Credirs Foreign correspondence

K. EIROLA, EINO SUOMELA, Accounts Office

STIG Tt)RNROTH, Cash

INSTITUTE FOR ECONOMIC RESEARCH

LAURI KORPELAINEN, HENRI J. VARTIAINEN, Acting Director Head of department

Helsinki 1968. Government Printing Centre