TNAG-0381-FCO40-427-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 151

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of total Government expenditure will be on social and

community services and this represents an expenditure of

something like US$7,000 million at constant (1972)

prices compared with US$2,600 million during the last

decade.

27. It should not be thought that public expenditure

is so rigidly constrained by the need to protect the

rate of growth of the private sector that the Government

has no room at all for manoeuvre. I have already

pointed out that our mixture of conservative fiscal

policies and liberal economic policies has tended to

produce overall budget surpluses and this has resulted

in the accumulation of substantial reserves. There could

also be recourse to external borrowing, notwithstanding that

loans must ultimately be repaid and that budgetary problems

could arise if borrowing was in respect of projects which

were not directly self-liquidating.

Regardless of

the source of finance, however, expenditure would need to

be carefully phased in order to ensure that the pressure

of aggregate demand for the economy's resources did not

build up to levels which would impede the rate of growth

of exports.

The Future of the Automatic Corrective Mechanism

28.

But it has been argued that, when all is said and

done, Hong Kong will simply not be able to maintain both

an internal and an external balance, however delicately

the Government may tread in order to avoid disturbing

the automatic equilibrating mechanism. Hong Kong's

undeniable economic successes, it is sometimes said,

/are....