XN000022-1975-02-26 — Page 26

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WEDNESDAY, FEBRUARY 26, 1975

RESERVES NOW ONLY ABOUT ONE-THIRD OF ESTIMATED EXPENDITURE

HONG KONG WILL PROBABLY BE ENTERING THE NEW FINANCIAL YEAR WITH FISCAL RESERVES REPRESENTING ONLY ADOUT FOUR MONTHS OF TOTAL ESTIMATED EXPENDITURE FOR THE YEAR, THE FINANCIAL SECRETARY, THE HON. PHILIP HADDON-CAVE, INDICATED TODAY.

HE ESTIMATED IN HIS BUDGET SPEECH THAT THE RESERVES ON APRIL 1 THIS YEAR WOULD BE $2,371 MILLION $513 MILLION LESS THAN THE POSITION A YEAR AGO. THE NEW RESERVES ESTIMATE REPRESENTS ON! Y 35 PER CENT OF THE ESTIMATED EXPENDITURE OF $6,615 MILLION FOR 1975/76.

IN SHARP CONTRAST, THE RESERVES ON APRIL 1, 1974 AT $2,C32 MILLION REPRESENTED 52 ̊ PEN CENT OF THE ESTIMATED $5,493 MILLION EXPENDITURE FOR THAT YEAR. ON APRIL 1, 1973, THE RESERVES STOOD AT $3,158 MILLION, REPRESENTING 75 PER CENT OF THE YEAR'S $4,290 MILLION ESTIMATED EXPENDITURE.

MR. HADDON-CAVE SAID TWO FACTORS CAUSED AN EROSION OF THE FISCAL RESERVES IN THE CURRENT 1974/75 FINANCIAL YEAR.

ONE WAS THE DEFICIT ON BUDGETARY ACCOUNT WHICH WOULD BE OF THE ORDER OF $410 MILLION, AND THE OTHER WAS THE STRENGTH OF THE HONG KONG DOLLAR IN THE FOREIGN EXCHANGE MARKET, INVOLVING A FALL IN THE VALUE OF OUR FOREIGN CURRENCY ASSETS IN HONG KONG DOLLAR TERMS OF PROBABLY $80 MILLION. OF THIS $30 MILLION LOSS $35 MILLION CAN BE RELATED TO STERLING ASSETS, AND $45 MILLION TO THE HONG KONG DOLLAR'S STRENGTHENING AGAINST OTHER CURRENCIES, LARGELY THE U.S. DOLLAR.

THIS LOSS, HE ADDED, HAD BEEN CALCULATED BY THE ACCOUNTANT GENERAL AFTER TAKING INTO ACCOUNT COMPENSATION OF $45 MILLION RECEIVED FROM THE UNITED KINGDOM GOVERNMENT UNDER THE UNILATERAL STERLING GUARANTEE ARRANGEMENT COVERING THE PERIOD FROM SEPTEMDER 25, 1973 TO MARCH 31, 1974.

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THE FINANCIAL SECRETARY SAID HE EXPECTED THAT $315 MILLION OF THE $2,371 MILLION RESERVES ON APRIL 1, 1975 WOULD BE HELD WITH BANKERS IN HONG KONG AND THAT $2,056 MILLION WOULD BE HELD ABROAD TO FORM PART OF HONG KONG'S FOREIGN EXCHANGE RESOURCES. THESE WOULD CONSIST OF OVERSEAS ASSETS OWNED BY THE GOVERNMENT AND THE BANKING SYSTEM AND PRIVATELY HELD ASSETS.

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