an estimated balance of payments deficit of $21 million, said Finance Minister the Hon. David Saul.

But the first quarter deficit -- $12 million more than first quarter 1994 -- is "well within tolerance levels and is perfectly acceptable'', Dr. Saul said in the House of Assembly yesterday.

"The current account of Bermuda's balance of payments invariably shows a deficit in the first quarter of the year,'' he said.

"This is because tourism receipts are usually low during the winter months while imports remain high in anticipation of the summer and stores restock following Christmas sales.'' The Bermuda Monetary Authority (BMA) released it quarterly notice, which included balance of payments statistics, yesterday.

Balance of payments is a system of recording all of a country's international economic transactions.

"On May 11 The Royal Gazette carried an editorial speculating that Bermuda's balance of payments was showing a $70 million deficit. As the Ministry of Finance pointed out at the time, this article was an example of unfounded mischief-making,'' said Dr. Saul.

The increase over last year is more than accounted for by a $19 million increase in imports. This high import figure reflects an increase in imported machinery and equipment which is a clear indication of improving confidence in our economy, he said.

Over the past five years, Bermuda's first quarter current account deficit has averaged $30 million while Bermuda's annual current account amount has shown a surplus for the past three years, said Dr. Saul.

A five percent decrease in visitor arrivals accounted for the $3 million decline in tourist earnings during first quarter, said the BMA.

The balance of payments helps a country evaluate its strengths and weaknesses and forecast currency strength.

A surplus is not necessarily good nor is a deficit necessarily bad as the state of the economy and manner of financing a deficit are important considerations.

Meanwhile, Bermuda's capital account -- part of the balance of payments covering movement of investments -- shows a surplus of $20 million for first quarter, up from a deficit of $37 million in the same quarter last year.

For 1992, 1993 and 1994, Bermuda's capital account balance was in deficit; $61 million, $75 million and $42 million respectively.

Net outflow of long term capital was $14 million.

l The BMA said outflow resulted from: Debt repayment to non-residents of $4 million.

Government investing in pension funds abroad of $3 million.

Residents purchasing foreign real estate of $2 million.

Purchases of foreign securities by residents and entities of $17 million.

Other outflows worth $6 million.

The above outflows were offset by $18 million coming to Bermuda which consisted of: Sale of local property to non-residents of $10 million.

Borrowings from non-residents of $7 million.

Other inflows of $1 million.

The decrease of $31 million in net foreign currency holdings of the banks reflects financing the $21 million current account deficit. The decrease of $3 million in the BMA's net foreign currency holdings reflects a decrease in Bermuda currency notes and coins in circulation, the BMA said.