XN000022-1990-03-07 — Page 26

WEDNESDAY, MARCH 7, 1990

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COMING YEARS UNLIKELY TO BE AS FISCALLY COMFORTABLE

SUBSTANTIAL SURPLUSES HAVE BEEN ADDED TO THE GOVERNMENT'S RESERVES IN RECENT YEARS, BUT THE NEXT FEW YEARS ARE UNLIKELY TO BE AS FISCALLY COMFORTABLE, THE FINANCIAL SECRETARY, THE HON SIR PIERS JACOBS, SAID TODAY.

PRESENTING HIS BUDGET. THE FINANCIAL SECRETARY SAID THERE WOULD BE A FALL IN THE RELATIVE SIZE OF OUR RESERVES AND WE MUST NOT EXACERBATE THAT DECLINE BY UNWISE EXPENDITURE OR REVENUE CONCESSIONS, HOWEVER POPULAR SUCH A COURSE OF ACTION MIGHT BE IN THE SHORT TERM.

HE POINTED OUT THAT AT THE END OF THE CURRENT FINANCIAL YEAR THE CONSOLIDATED RESERVES WERE EXPECTED TO STAND AT ABOUT $71 BILLION, WHICH WAS EQUIVALENT TO ABOUT 65 PER CENT OF CONSOLIDATED PUBLIC SECTOR EXPENDITURE.

"THIS HIGH PERCENTAGE IS UNLIKELY TO BE MAINTAINED, EVEN ASSUMING GROWTH IN THE ECONOMY AT THE TREND RATE OF 5.5 PER CENT, SIR PIERS SAID.

A

HE SAID THAT IN THE CONTEXT OF THE PROGRAMME OF PUBLIC EXPENDITURE TO WHICH THE GOVERNMENT WAS COMMITTED, THE RESERVES HAD CRITICAL PLACE IN RELATION TO THE OVERALL STATEGY FOR PUBLIC FINANCES.

THE RESERVES WERE SOMETIMES SEEN AS A SYMBOL OF HONG KONG'S ECONOMIC AND FINANCIAL SUCCESS, THE FINANCIAL SECRETARY SAID.

"WE MUST MAINTAIN OUR RESERVES AT AN ADEQUATE LEVEL." HE

STRESSED.

SIR PIERS POINTED OUT THAT TO SOME EXTENT, WHAT WAS AN ADEQUATE LEVEL WAS A MATTER OF JUDGEMENT, BUT IN FORMING THAT JUDGEMENT IT WAS NECESSARY TO TAKE INTO ACCOUNT A NUMBER OF FACTORS.

LIABILITIES

TO

"FIRST. WE MAY HAVE TO DRAW ON RESERVES TO MEET UNFORESEEN SHORTFALLS IN REVENUE. SECONDLY, WE HAVE CONTINGENT COVER."

HE EXPLAINED THAT THESE INCLUDED GUARANTEES OF NON-GOVERNMENT PUBLIC SECTOR BORROWING, SUCH AS THAT BY THE TWO RAILWAY CORPORATIONS.

IN ADDITION, THE GOVERNMENT MIGHT BE CALLED UPON TO INCREASE ITS EQUITY HOLDING IN THE MTRC AND THE GOVERNMENT ALSO HAD TO COVER THE LIABILITIES OF THE HONG KONG EXPORT CREDIT INSURANCE CORPORATION.

"ALTHOUGH WE CAN MEASURE IN FINANCIAL TERMS THE CONTINGENT LIABILITIES I HAVE MENTIONED, IT IS EXTREMELY UNLIKELY THAT WE WOULD BE REQUIRED TO DISCHARGE THEM IN FULL.

"NEVERTHELESS, IT IS ONLY PRUDENT TO MAKE SOME ALLOWANCE THEM," SIR PIERS SAID.

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/HE ALSO