XN000022-1991-03-06 — Page 12

11

WEDNESDAY, MARCH 6, 1991

"THIS LATTER DEBT IS FOR THE ACCOUNT OF THE EXCHANGE FUND AND FUNDS BORROWED ARE NOT AVAILABLE FOR THE GENERAL PURPOSES OF THE

GOVERNMENT."

THE FINANCIAL SECRETARY SAID THERE WAS A GOOD AND WIDELY ACCEPTED JUSTIFICATION FOR BORROWING TO FINANCE LARGE SCALE CAPITAL PROJECTS.

"THE BENEFITS OF SUCH PROJECTS WILL ACCRUE TO FUTURE GENERATIONS, AND IT IS NOT UNREASONABLE THAT THOSE GENERATIONS SHOULD MAKE SOME FINANCIAL CONTRIBUTION," HE SAID.

"OFTEN THE PROJECTS THEMSELVES WILL GENERATE INCOME ADEQUATE TO SERVICE AND REPAY THE FUNDS BORROWED SO THAT THERE SHOULD BE NO EXTRA OR UNDUE BURDEN ON TAXPAYERS.

"IN HONG KONG IN RECENT YEARS IT HAS NOT BEEN FOUND NECESSARY TO INCUR DEBT FOR THE PURPOSES OF FINANCING CAPITAL PROJECTS.

"WE HAVE ENJOYED SUBSTANTIAL OPERATING SURPLUSES WHICH, TOGETHER WITH CAPITAL REVENUE, HAVE BEEN SUFFICIENT TO COVER ALL OUR CAPITAL EXPENDITURE AND STILL PROVIDE AN OVERALL SURPLUS TO BE ADDED TO OUR RESERVES.

"BUT IT IS CLEAR THAT THE LEVEL OF CAPITAL EXPENDITURE BOTH ON DIRECT CAPITAL WORKS AND ON EQUITY INVESTMENT IN STATUTORY BODIES WILL RISE SIGNIFICANTLY IN THE NEXT FEW YEARS.

"WHILE THE OPERATING SURPLUS TOGETHER WITH CAPITAL REVENUE WILL STILL FINANCE THE MAJORITY OF OUR CAPITAL EXPENDITURE, WE SHOULD NOT ASSUME THAT WE WILL BE ABLE TO COVER ALL OUR REQUIREMENTS IN THIS WAY," SIR PIERS SAID.

SIR PIERS SAID BORROWING BY MEANS OF A PROGRAMME OF GOVERNMENT BONDS COULD NOT BE MATCHED PRECISELY TO OUR CASH FLOW REQUIREMENTS.

TO THOSE TO HAVE A TO THE

"THE AMOUNTS ΤΟ BE RAISED WILL HAVE REGARD REQUIREMENTS BUT WILL ALSO TAKE INTO ACCOUNT THE NEED CONTINUING RANGE OF GOVERNMENT BONDS, WHICH IS IMPORTANT DEVELOPMENT OF A GOVERNMENT BOND MARKET.

"FUNDS NOT IMMEDIATELY REQUIRED WILL BE PRUDENTLY MANAGED, ALONG WITH OUR RESERVES," HE SAID.

HE

SAID SINCE THE BEGINNING OF LAST YEAR, THE GOVERNMENT HAD GAINED VALUABLE EXPERIENCE IN THE RUNNING OF THE EXCHANGE FUND BILLS PROGRAMME, WHICH CONSISTS OF ISSUES WITH MATURITIES OF UP TO ONE YEAR.

"IN ORDER то ENSURE THAT THERE IS A REASONABLY CONTINUOUS SPECTRUM OF MATURITIES FOR TRADING AND HEDGING PURPOSES, I INTEND, FOR THE PROGRAMME OF GOVERNMENT BONDS, TO START WITH ISSUES OF TWO OR POSSIBLY THREE-YEAR MATURITIES.

PROGRAMME WILL PROVIDE FOR PERIODIC ISSUES OF RELATIVELY

"THE SMALL AMOUNTS.

/"THIS APPROACH