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4
the staff suggestions.
We
are therefore conducting a
thorough examination of the proposals put forward.
So far,
we have established that full funding of pensions is not a
feasible option. We need to conduct further studies before
we can reach a firm conclusion on the other suggestions, but
we shall be pleased to inform the Chinese Side of our initial
assessments.
9.
Q
Full funding of pensions is not possible because
some $120 billion would be required to generate sufficient
income to meet the pension liabilities accrued by 1997. The
size of the fund is prohibitive and Cannot
annot be established
without borrowing on a massive scale or sharply increasing
rates of taxation, neither of which can be contemplated.
Further, the fund would deplete the fiscal reserve and reduce
Government's overall credit standing and make its ability to
borrow in the markets more difficult. It would also unless
invested with the Exchange Fund, have a significant impact on
the ability of the Exchange Fund to maintain the stability of
the currency.
investment of the fund in other
currencies
3
Offshore
would have
serious
implications
on
the
international value of the HK dollar.
10.
of
As regards the option of partial funding
pensions, staff have suggested that a reserve fund should be
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