XN000022-1993-03-03 — Page 56

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WEDNESDAY, MARCH 3, 1993

"REVENUE WILL OF COURSE INCREASE SUBSTANTIALLY IN 1997 WHEN THE FULL PROCEEDS FROM LAND SALES WILL BE RETAINED, TOGETHER WITH INTEREST ON THE LAND FUND."

EXPLAINING WHY WE SHOULD BE PREPARED TO ACCEPT A SHORT PERIOD OF TEMPORARY DEFICITS, MR MACLEOD SAID IT WAS PLAINLY UNNECESSARY TO BUILD UP OUR RESERVES ABOVE THE LEVEL WHICH PRUDENT JUDGEMENT AND PAST EXPERIENCE JUSTIFY.

"OUR ROBUST ECONOMY AND THE SURGE IN GOVERNMENT REVENUES HAVE RAISED OUR RESERVES THIS YEAR WELL ABOVE THAT LEVEL.

"BUT IT IS SOMETIMES OVERLOOKED THAT THE ONLY WAY IN WHICH THE GOVERNMENT CAN TRANsfer resoURCES FROM THE RESERVES IS BY RUNNING A DEFICIT." MR MACLEOD SAID.

"IN OTHER WORDS, THE DEFICITS WHICH I AM PROJECTING AMOUNT TO NO MORE THAN A PRUDENT AND PROPER ADJUSTMENT OF OUR BALANCE SHEET то PUT THE REDUNDANT PORTION OF OUR RESERVES TO CONSTRUCTIVE USE FOR THE MAXIMUM BENEFIT OF HONG KONG, HE ADDED.

MR MACLEOD GAVE THE FOLLOWING REASSURANCES ABOUT THIS USE OF PART OF THE RESERVES TO FINANCE THESE TEMPORARY DEFICITS:

* THE RESERVES RESULT FROM THE STRENGTH OF THE ECONOMY AND PUBLIC FINANCES, WHICH HAS CREATED A LARGER REVENUE FLOW THAN THE GOVERNMENT COULD COMFORTABLY SPEND IN THE LAST TWO YEARS.

*

*

BE

THE RESERVES WILL MAINLY BE USED FOR NON-RECURRENT PURPOSES AND CAPITAL PROJECTS. RECURRENT EXPENDITURE GROWTH WILL KEPT UNDER CONTROL.

SOME OF THESE ADDITIONAL SPENDING INITIATIVES WILL FURTHER ENHANCE THE INFRASTRUCTURE AND IMPROVE THE CAPACITY TO TAKE FULL ADVANTAGE OF INCREASING BUSINESS OPPORTUNITIES, PARTICULARLY OUR CHINA LINKS. THEY WILL REDUCE BOTTLENECKS AND THE COSTS OF DOING BUSINESS IN HONG KONG.

THIS WILL THEREBY CONTRIBUTE TO THE LONG-TERM ABILITY ΤΟ FIGHT INFLATION. ANY SHORT-TERM PRESSURE ON PRICES WILL BE CONTROLLABLE BECAUSE THE IMPACT WILL FALL MAINLY ON THE CONSTRUCTION

WHERE COSTS HAVE BEEN FALLING SIGNIFICANTLY.

SECTOR,

THESE SPENDING PLANS, INCLUDING INFRASTRUCTURE INVESTMENTS, ARE ENTIRELY CONSISTENT WITH THE WISH TO ENSURE THAT THE FUTURE SARG GETS OFF TO A SOUND START, WITH HEALTHY FISCAL RESERVES.

ON THE NEED FOR RESERVES, MR MACLEOD SAID THE GREATEST REASSURANCE OF ALL WAS PROVIDED BY THEIR HEALTHY STATE.

FORECASTING AN ACCUMULATED RESERVE BALANCE OF $78.4 BILLION FOR THE END OF 1996/97, HE NOTED THIS WAS SOME $6.8 BILLION HIGHER THAN THE FORECAST HE DESCRIBED AS APPROPRIATE LAST YEAR.

"THE INCREASE