of money overseas and those accumulated investments are earning the Island increasing amounts of foreign exchange, according to the latest Bermuda Monetary Authority annual report.

Bermuda's current account surplus was $125 million in 1996, a drop of 18 percent from the previous year. Foreign exchange earnings from international companies, tourism and investment income were the three contributors to the surplus.

Bermuda residents and companies invested $40 million in overseas business, an increase of nine million over 1995, and $141 million in securities, an increase of $41 million over 1995. They also spent $37 million, an increase of $17 million over 1995, on loan repayments and purchases of real estate outside of Bermuda.

In all money invested overseas in 1996 totalled $218 million, a 44 percent increase over 1995.

Meanwhile investment income returning to Bermuda from all the money invested abroad over the years came to $131 million, the third largest foreign exchange earner for the Island behind international business and tourism.

Malcolm Williams, the BMA's general manager, attributed the continuing growth in overseas investments to the relaxation of foreign exchange controls. He said those investments overseas were paying dividends for the Island. He projected that foreign investment income earnings could rise to about $200 million a year within five years.

"This is the third pillar of the economy,'' he said.

In 1996 1.2 billion was spent overseas, while about $1.3 billion was earned giving Bermuda a current account surplus of $125 million, a drop of about 18 percent or $22 million compared with the previous year. Mr. Williams called the drop "marginal''.

"What's more important to note is that over the last number of years the balance of payments has always been in a surplus,'' he said.

Bermuda has had a current account surplus since 1991 after recording a deficits of $24 million in 1990, $51 million in 1989 and $35 million in 1988.

On the payments side of the ledger in 1996 Bermuda residents and companies spent $18 million more, or $569 million, on imports of merchandise in 1996 compared to 1995. They spent $21 million more, or $167 million, on travel overseas. They paid $10 million more, or $47 million, on profession services performed by non-residents. Investment income payments, primarily made up of dividend and interest payments and pension fund market value adjustments, increased by $12 million to $65 million.

They also spent $27 million more, or $221 million, on miscellaneous overseas services, a category which includes financial services, telecommunications and government transactions. The BMA attributes the growth in the "miscellaneous'' category to higher spending on telecommunications services.

On the receipt side of the ledger, Bermuda's exports earned the Island $14 million more, or $67 million, in 1996 compared to 1995. Shipping and other transportation receipts decreased by $8 million to $16 million in 1996 "due to a decline in freight and insurance earnings and related Government fees,'' according to the annual report.

Bermuda earned $550 million in 1996 from professional, managerial and technical services category (primarily international business receipts), an increase of $23 million over 1995. Travel income from tourism earned the island $475 million in 1996, a decrease of $5 million over the previous year.

Earnings in the other goods, services and income category, made up of miscellaneous income earned by banks and local insurance companies, increased by $14 million to $109 million in 1996.

Overall Bermuda had a trade deficit of $502 million, a $86 million deficit in the shipping and other transportation category, and $112 million deficit in other goods services and income category. The Island also had a deficit of $52 million in money transfers.

The three overall income earners for the Island were from the professional, managerial and technical services category, which had a surplus of $503 million, the travel category, which had a current account surplus of $308 million, and the investment income category, which had a surplus of $66 million.

Elsewhere in the annual report the BMA notes it gave permission for individuals and organisations to covert sums amounting to $59 million into foreign money in 1996 over the delegated limit of $25,000 allowed per year.

"These exceptional permissions were normally, although not exclusively, linked to retirement planning,'' the BMA stated.

In 1997 the BMA began a system whereby it stored its supplies of Bermuda dollar banknotes at the three local banks. The banks were then allowed to use portions of the stored sums as needed with permission from the BMA. Mr.

Williams said the move saved the BMA money as previously it had to store the money elsewhere and then move it to the banks as needed.

"It's a more efficient, more secure way of doing it,'' he said. "There has been some very significant savings.'' Selected Balance of Payments estimates (BD$ millions) Source: Bermuda Monetary Authority Current account Payments 1993 1994 1 995 1996 Total 1,131 1,179 1,158 1,223 Receipts Investment Income 87 77 117 131 Total Receipts 1,152 1,232 1,305 1,348 Current account Surplus 21 53 147 125 *** Capital & Financial Account Long Term Investment (Payments) Direct investments 14 11 31 40 Portfolio Investments 51 62 100 141 Other 55 86 20 37 Total 120 159 151 218