controls, as had been widely predicted.

Finance Minister the Hon. David Saul announced that the ten percent foreign currency purchase tax would be abolished, and a single rate of tax -- 0.25 percent or 25 basis points -- would be applied to the purchase of all foreign currency.

The interest rate ceiling has been removed, and fees and charges will be scrapped. However, the $25,000 overseas investment limit per year for each individual will stay in place for the time being.

The restrictions on borrowing in foreign currency and on the holding of Bermuda dollar accounts by non-residents have been relaxed.

Fears expressed that the removal of the 60/40 ownership rule could open the doors to foreign ownership were scuppered.

Dr. Saul said in his Budget Speech that there had never been any intention to relax the restriction on foreign ownership of property or local companies in Bermuda.

But Dr. Saul pledged that all exchange controls, including the $25,000 limit, would be dismantled within the next 12 months.

"We are not giving the wealthy a break. We are trying to encourage ordinary Bermudians to invest for their old age, and, in turn, earn foreign currency for Bermuda,'' he said at a Budget Day press conference yesterday.

"We will keep the $25,000 maximum, that can be taken out of the country per year, on the Statute Books for the time being.

"The reason is simple,'' said Dr. Saul. "We didn't want to do a big bang move, simply because we wanted to observe what would happen once the ten percent tax was removed.

"We hope this will have a positive effect on people in Bermuda wishing to save -- specifically saving for their old age.

"The removal of the ten percent foreign currency purchase tax will mean Bermuda has three legs to its tripod of foreign currency earnings -- international business, tourism, and also investment income.'' The Government will introduce legislation to amend the Interest and Credit Charges (Regulations) Act 1975, and to rescind two Orders made under that Act.

As well as releasing the interest rate ceiling, finders' fees and credit charges will be abolished.

Lenders will now be able to quote all inclusive interest rates, free from additional charges.

The Budget was generally hailed as a "good one'', particularly by the heads of the Bank of Butterfield and the Bank of Bermuda.

Mr. Donald Lines, president and CEO at the Bank of Bermuda, said the bank had always been in favour of relaxing exchange controls.

"The Minister has taken steps to reduce the regulatory framework that applies to exchange controls in an orderly way,'' said Mr. Lines. "It is a reasonable, sensible budget, with a sense of caution.'' The bank, he said, was concerned that the releasing of controls might have disturbed Bermuda's capital markets, and put pressure on mortgages.

"We have to be concerned about a potential outflow of mortgage funding,'' said Mr. Lines, "and also the possibility of borrowing at higher rates. We see rates in the US rising again.'' "Hopefully, Bermuda's local deposit base will not be too significantly affected,'' he added.

The Budget was described as "liberating'' for the average person in Bermuda, by one economist.

The ten percent tax may not have deterred the high net worth individual who wished to invest overseas, but less wealthy locals had been put off, he said.

Other than investing in deposit accounts at the local banks and deposit companies, purchasing property was the main investment of choice.

Dr. Saul explained that the overseas investment fee was originally instated in the '70s as a five percent investment tax to control foreign capital outflow.

"Just after the second OPEC crisis, when interest rates started to climb out of all proportion, there was a propensity for Bermudians to start putting money overseas. To dampen that, the Government in the late '70s moved the rate from five percent to ten percent.

"When rates came tumbling down, the Government did not take the tax back from ten percent to five percent.

"Today, I will remove that tax in its entirety,'' he said.

Dr. Saul assured mortgage holders that there would be no immediate effect on rates, although in the long term he predicted a further downward movement on interest rates locally.

Mr. Michael Collier, president and chief operating officer at the Bank of Butterfield, affirmed this opinion, stating that financial instruments could be applied to protect mortgage holders from fluctuating interest rates.

"Rates are likely to go down a little, and will reach a plateau,'' said Dr.

Saul.

Mr. Collier predicted interest rates would fall in line with overseas interest rates over a year to 18-month period.

The Bank of Butterfield, Bank of Bermuda, Bermuda Mortgage and Finance, and Butterfield Mortgage & Finance trimmed their interest rates on February 1 this year in anticipation of Budgetary changes.

Another new positive aspect of business for Bermuda's banks could be the opening of Bermuda dollar accounts by foreigners, said Mr. Collier.

"We might see foreigners take more interest in buying local stock, which is providing a good return.'' However, Mr. Lines doubted that there would be an increase in foreigners opening Bermuda dollar accounts.

Mr. Donald Lines Mr. Michael Collier.