G.F. 316
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bearing debt certificates. Because of our liabilities these reserves cannot be considered as fully and freely available for use. Apart from
from the liability arising
arising from
from the bond issue,
there are also contingent and other liabilities. The extent of cover for these contingent liabilities is obviously debatable, but we have prudently worked on a gearing of one to three. Our known contingent liabilities should be $26.2 billion by 1989 taking our usual four year view (18). On that basis therefore we need to reserve of the order of $8.7 billion, which means $6.6 billion in "free" reserves as at April 1985. It is arguable that there is a considerable degree of over provision, for instance in the case of guarantees for HOS mortgages and particularly gold coins. The principles will be reconsidered
before the next budget.
51.
An assessment of our performance over the past five years 1980-81 to 1984-85 on the basis of four principles which we apply to the management of Hong Kong's public finances is at Appendix A of the printed speech (19).
52.
Having
Draft Estimates
completed
completed the background,
of Expenditure,
of Expenditure, the Revenue
revenue proposals for 1985-86.
I now present the Estimates and my
(18)
At 31 March:
1985 1989
($mn) ($mn)
MTRC: guarantee of debt
Export Credit Insurance Corporation:
guarantee of maximum liability
7,024 3,763
3,600 7,000
Home Ownership Scheme: guarantee of mortgages Asian Development Bank: uncalled capital
and unencashed promissory notes
5,092 13,525
363
447
H.K. Building and Loan Agency: guarantee of
notes issued
400
500
H.K. Nuclear Investment Company: loan
guarantee
325
City Polytechnic: guarantee of bank loan Gold coins
260
260
298
400
Demonetized currency notes
10
10
Total
17,047 26,230
(19) The changes in the past few years arising from reductions in capital revenue and from increases in recurrent revenue have been reflected in performance against our guidelines and have highlighted the need to alter some of them. They are now being examined with this in mind.
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