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MDHIAN 9196
3. I RECOGNISE YOUR INTEREST IN ENSURING THAT ANY SUCH LETTER DOES NOT IMPLY THAT THE LEVEL OF HKG'S RESERVES IS GUARANTEED BY HMG. BUT I VERY MUCH HOPE THAT THERE WILL NOT BE ANY UNDUE DIFFICULTY OR DELAY IN CLEARING A TEXT.
4. TO ANSWER THE REMAINING POINTS IN PARAGRAPHS 5 AND 6 OF YOUR TUR, I WOULD IF NECESSARY EXPLAIN TO LU WHAT WE MEAN BY RETAINING THE AGREED SUM IN THE RESERVES. IN FACT, WE DO NOT EXPECT THE FISCAL RESERVES UNDER ANY OF THE FOUR AIRPORT OPTIONS TO DROP NEAR HKD 15 BILLION BEFORE 1995/96. IF WE LOOKED LIKELY TO DROP BELOW THAT FIGURE SUBSEQUENTLY, WE WOULD CERTAINLY HAVE TO CONSULT THE CHINESE. THEY WILL IN ANY CASE BE ABLE TO CHECK THE
STATE OF THE RESERVES THROUGH THE PUBLISHED AUDITED ACCOUNTS AT
THE END OF EACH FINANCIAL YEAR.
5. THE REFERENCE TO FUNDS INVESTED IN THE EXCHANGE FUND IN PARAGRAPH 10 OF MY TELNO 885 MEANS THE FISCAL RESERVES DEPOSITED WITH THE EXCHANGE FUND. WE DO NOT INTEND THE HKD 15 BILLION TO BE IN 1991 PRICES, BUT RATHER TO BE HKD 15 BILLION AT MONEY OF THE DAY PRICES. IN OTHER WORDS, THE SUM WILL NOT GROW IN REAL TERMS IN LINE WITH INFLATION.
7. WE DO NOT INTEND THAT ANY LIMIT SHOULD APPLY TO BORROWING BY PUBLIC BODIES GUARANTEED BY HKG, UNLIKE HKG BORROWING ITSELF. TO GIVE AN IDEA OF THE LIKELY SCALE OF SUCH BORROWING BY 1997, UNDER OPTION 2 WE FORECAST HKD 10.7 BILLION BORROWING BY THE AIRPORT AUTHORITY AND HKD 8.1 BILLION BORROWING BY THE MASS TRANSIT RAILWAY CORPORATION. THESE FIGURES DO NOT INCLUDE FINANCING COSTS.
8. GRATEFUL FOR ANY COMMENTS DESKBY 22233OZ. I SHALL BE AT FANLING BUT TELEGRAMS WILL BE BROUGHT TO ME BEFORE THE MEETING.
WILSON
YYYY
Redacted Under FOI Exemption Sec 27(1)(a)(c)(d)
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