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Extract MW Speech in
Speech in Legistative Council 1/4 26-2-69
from Financial Secretary
an
I went on last year to say that the question facing us
in respect of this Fund was whether, in the unscttled international monetary situation, we could afford from then on to regard this surplus, and futury accruals to it, as available for any other purpose than its basic one of protecting the security of, and the value of, our currency; and that I was unable to venture a guess whether we could economisc on exchange reserves and spend future Exchange Fund surpluses; or would have to build up and maintain substantial additional reserves in the Exchange Fund. I concluded that we would in the meantime regard only the existing surplus and half futurc accruals as available for fiscal purpose's.
A
Much has happened in the monetary field since then. We now have a 90% guarantee from Britain of the U.S. dollar value of our official sterling reserves proper; while at the end of last month we offered banks a scheme for bringing their reserves inder the official umbrella where they will also ruceive a 90% guarantee from Britein. The Fund continues to take a risk on 10% of its own assets and, as the banks have been offered a 100% guarantee of the Hong Kong dollar value of their sterling against the Fund's own 90% U.S. dollar guarantee from Britain, the Fund will be taking a risk on 10% of bank assets toù, alt ough the banks will be paying something for their cover over the 4 years of the scheme. The Fund will also hav、 to neccpt e degree of risk for any forward exchange cover scheme we are able to devise. But these risks are quantitatively very small in comparison with those we were previously running and Little more than the existing 105% note iscue cover, plus banks' payments for their cover, should be adequate to meet the risk, freeing the present disposable surplus and the whole of net future accruals for fiscal purposes.
As net futuro accruals should be of
the order of $120 million a year at least, this is a very valuable addition to our public revenues, equivalent at present to about 3% on Earnings and trofits tax. It Socha unlikely, however, then we shall dip into them for ann ti
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