WEDNESDAY, MARCH 26, 1936
MARKETABILITY OF EXCHANGE FUND'S ASSETS QUESTIONED
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THE SENIOR UNOFFICIAL MEMBER, THE HON LYDIA DUNN, TODAY QUESTIONED WHETHER THE EXCHANGE FUND'S ASSETS WERE STILL OF GOOD MARKETABILITY AND SOUGHT MORE INFORMATION ON THE POSITION.
SPEAKING IN THE RESUMED BUDGET DEBATE, SHE SAID THAT WHEREAS THE FUND'S ASSETS WERE APPARENTLY ALMOST ENTIRELY IN THE FORM OF BANK DEPOSITS AND FINANCIAL INSTRUMENTS OF GOOD MARKETABILITY IN 1983. IT NOW HOLDS THE GOVERNMENT'S SHARES IN THE CROSS HARBOUR TUNNEL THE HONG KONG BUILDING AND LOAN AGENCY AND HONG KONG AIR CARGO TERMINAL.
+1TS COMMITMENT TO TWO INSOLVENT BANKS IS ... SIGNIFICANTLY LESS IF AT ALL MARKETABLE, SHE SAID.
SHE SAID IT WAS STRETCHING IT A BIT TO USE THE FUND TO BAIL OUT DEPOSITORS IN CERTAIN FINANCIAL INSTITUTIONS EVEN IF IT COULD BE ARGUED THAT THEIR COLLAPSE MIGHT HAVE TEMPORARILY AFFECTED THE EXCHANGE VALUE OF THE CURRENCY.
+WE MUST ALSO TAKE INTO ACCOUNT WHEN CONSIDERING THE EXCHANGE FUND THAT 14 BILLION DOLLARS OF ITS ASSETS ARE IN FACT THE MAJOR PORTION, 90 PER CENT AS AT MARCH 31, 1985, OF THE GENERAL REVENUE BALANCE, THAT IS TO SAY, THE GOVERNMENT'S LIQUID RESERVES, SHE SAID.
+UNLESS THE EXCHANGE FUND HAS EASILY REALISABLE ASSETS WORTH 14 BILLION DOLLARS, THE GOVERNMENT'S 'FREE FISCAL RESERVES' ARE NOT ACTUALLY AVAILABLE TO MEET UNFORESEEN BUDGETARY DEFICITS, SHE WARNED.
EARLIER, MISS DUNN WELCOMED THE FACT THAT THE FINANCIAL SECRETARY HAD ACCEPTED THREE FUNDAMENTAL POINTS WHICH SHE HAD CALLED FOR LAST YEAR. THEY WERE THE NEED TO SET THE BUDGET IN THE CONTEXT OF A LONGER TERM FORECAST; THE NEED TO BASE BUDGETARY STRATEGY ON REVENUE RATHER THAN EXPENDITURE: AND THE NEED TO ACHIEVE A BALANCE BETWEEN REVENUE AND EXPENDITURE,
THE NEW FORECAST PROVIDED A USEFUL INDICATOR OF A LONGER TERM TREND, SHE SAID, BUT IT WAS CLEAR THAT IT INDICATES THAT THE TREND N RESPECT OF INFLATION, PUBLIC SECTOR EXPENDITURE AND THE STATE OF OUR RESERVES REQUIRES CAREFUL EXAMINATION AND DEBATE,
MISS DUNN SAID ALTHOUGH IT WAS WISE AT THIS STAGE TO ASSUME A RELATIVELY LOW RATE OF GDP GROWTH AND PRICE INFLATION OF FIVE PER CENT, THE INFLATION RATE HAD TO BE BROUGHT DOWN FURTHER. THE GOVERNMENT COULD INFLUENCE IT BY REDUCING THE GROWTH RATE OF CONSOLIDATED EXPENDITURE.
+
/SHE SAID