16
Wednesday, December 13, 1972
"Interest rates in London have in general been higher than
elsewhere," he pointed out. If these rates were taken at one per cent
per annum higher then the extra interest would amount to some £30 million.
"This goes some way towards off-setting the capital loss we
have now suffered. It is a fact that all countries with overseas reserves
to invest find the choice of currency a difficult one, " he said.
Those countries who chose the U.S. dollar, he noted, suffered
a loss of 8.57 per cent last December and they had no guarantee at all
against further losses.
While our Sterling Guarantee and its extensions to the banks
through the Exchange Fund Guarantee Scheme had afforded us inadequate
protection, "it has proved better than no guarantee at all," he said.
The Financial Secretary explained that the Government's surplus
available for spending on future projects had been correspondingly
reduced and he gave two reasons for this.
Firstly, the free surplus in the Exchange Fund -- that is the
amount required to maintain the assets of the Fund at 105 per cent of the
note issue would be largely used up in adjustment payments to the banks.
The second reason was that the Hong Kong dollar value of the sterling
assets held on account of the General Account had been reduced.
Mr. Haddon-Cave estimated that the Colony's fiscal surplus at this
time stood at about $3,000 million as compared with $3,900 at March 31, 1972.
These calculations, he said, did not take into account any fall in
the market value of our securities nor the surplus accumulated so far this
year.
The Financial