CO129-561-10 Estimates 1938 2-9-1937 - 23-9-1938 — Page 21

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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