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THURSDAY, APRIL 13, 1978
ON FISCAL RESERVES, THE FINANCIAL SECRETARY DISAGREED WITH THE HON. T.S. LO'S SUGGESTION THAT WE SHOULD RESIGN OURSELVES TO THE INEVITABILITY OF THE MASS TRANSIT RAILWAY NOT BEING VIABLE AND USE A SUBSTANTIAL PROPORTION OF OUR FISCAL RESERVES TO REDUCE THE LOAN GEARING OF THE CORPORATION.
+TO EARMARK A PROPORTION OF OUR FISCAL RESERVES TO SECURE THE LOANS RAISED BY THE CORPORATION AGAINST A GUARANTEE BY THE GOVERNMENT DOES NOT IMPLY THAT THE CORPORATION WILL BE UNABLE TO SERVICE ITS DEBT.
+THESE LOANS ARE, IN THE OPINION OF THE CORPORATION'S CREDITORS, WELL SECURED BY THE PROJECTED CASH FLOW OF THE CORPORATION WHEN THE RAILWAY IS OPERATING. BUT THE TERMS UNDER WHICH THE LOANS ARE NEGOTIATED ARE, OF COURSE, GREATLY INFLUENCED BY THE VIEW TAKEN OF THE PARENT COMPANY'S FINANCIAL STRENGTH.
+ I DO NOT AGREE, THEREFORE, THAT THE GOVERNMENT SHOULD TAKE A LARGER EQUITY POSITION IN THE CORPORATION AND DEPRIVE ITSELF, MEANWHILE, OF THE USEFUL INCOME DERIVED FROM THE VARIOUS MONETARY INSTRUMENTS AND DEPOSITS IN WHICH OUR FISCAL RESERVES ARE HELD.+
THE FINANCIAL SECRETARY POINTED OUT THAT IN 1978-79, EVEN AT CURRENT INTEREST RATES, WE SHOULD EARN AT LEAST $230 MILLION FROM THESE INVESTMENTS, OR TWO-AND-A-HALF PER CENT OF TOTAL RECURRENT REVENUE.
REFERRING TO THE HON. MRS. KWAN KO SIU-WAH'S SUGGESTION THAT AT LEAST PART OF OUR RESERVES SHOULD BE USED TO ACCELERATE THE GROWTH RATE OF EXPENDITURE ON SOCIAL SERVICES, THE FINANCIAL SECRETARY SAID: +1 AM AFRAID WE SIMPLY MUST MAINTAIN A CERTAIN RELATIONSHIP BETWEEN OUR RESERVES, ON THE ONE HAND, AND OUR CONTINGENT LIABILITIES AND THE CURRENT EXPENDITURE, ON THE OTHER.
+WITHOUT THE SURPLUS OF NEARLY $1,100 MILLION THROWN UP BY THE BUOYANCY OF REVENUE IN 1977-78, THE GUIDELINE RATIOS WHICH I BELIEVE SHOULD DETERMINE THE LEVEL OF OUR FISCAL RESERVES WOULD BE SERIOUSLY BREACHED. THAT SURPLUS LIFTED THE LEVEL OF OUR FISCAL RESERVES FROM $3,713 MILLION A YEAR AGO TO ABOUT $4,800 MILLION TODAY.
+SO WITHOUT IT, AFTER ALLOWING $3,200 MILLION AS SECURITY FOR OUR CONTINGENT LIABILITIES, THE BALANCE OF OUR RESERVES WOULD ONLY BE SUFFICIENT TO COVER FIVE PER CENT OF EXPENDITURE IN THE CURRENT YEAR INSTEAD OF THE AGREED GUIDELINE OF 15 PER CENT.
+GIVEN THE UNCERTAINTIES OF THE INTERNATIONAL TRADING ECONOMY IN WHICH WE LIVE, AND OUR OBLIGATION TO MAINTAIN OUR RESERVES AND CAPITAL WORKS PROGRAMMES INTACT IN THE FACE OF SHORT TERM DIFFICULTIES, I WOULD REGARD THIS AS DANGEROUS LIVING INDEED.+
MR. HADDON-CAVE ALSO POINTED OUT THAT MRS. KWAN KO SIU-WAH WAS PAYING INSUFFICIENT ATTENTION TO THE GROWTH RATE OF EXPENDITURE ENVISAGED FOR 1978-79, COMPARED WITH 1977-78 (REVISED ESTIMATES): OVERALL IT IS 26 PER CENT.
ON SOCIAL WELFARE
E