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necessary Special Works pending the issue of
the second portion of the 1934 loan.
For 1938 revenue is conservatively
estimated at $30 million, and expenditure
(including essential Special Works expenditure)
at over $334 million; thus presaging a deficit
a
of a little over $3 million and/corresponding
reduction of surplus balances.
I agree with
Mr. Rogers that we should ask the Governor
especially for a report on the desirability of
issuing the balance of the 1934 loan at the
first opportunity with a view to recouping surplus
balances and so supplying a moderate reserve of
resources in liquid form to meet any unforeseen
eventuality. It may be that borrowing for
reconstruction in China when the present
hostilities cease will be on a scale to raise
the cost of local borrowing, and that the
opportune time for the Colony to raise the
balance of the 1934 loan is as soon as possible.
On the question of the adequacy of a
reserve balance of $10 million, I would not take
the present as an opportunity of suggesting that
something more would be proper. Whatever may be
the merits of a #1 general rule" of 6 month's
revenue, the necessary minimum is clearly
dependent on the general nature of a Colony's
chief sources of revenue. In the Federated
Malay States, for instance, such a minimum should
be very much higher than in an entrepot Colony
like Hong Kong. In any case Hong Kong has not
the means at present to do more than she is doing
and