TNAG-1361-FCO40-1807-Hong-Kong-Hansard-reports-and-minutes-of-the-meetings-of-the-1985 — Page 167

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bearing debt certificates. Because of our liabilities these reserves cannot be considered as fully and freely available for use. Apart from

from the liability arising

arising from

from the bond issue,

there are also contingent and other liabilities. The extent of cover for these contingent liabilities is obviously debatable, but we have prudently worked on a gearing of one to three. Our known contingent liabilities should be $26.2 billion by 1989 taking our usual four year view (18). On that basis therefore we need to reserve of the order of $8.7 billion, which means $6.6 billion in "free" reserves as at April 1985. It is arguable that there is a considerable degree of over provision, for instance in the case of guarantees for HOS mortgages and particularly gold coins. The principles will be reconsidered

before the next budget.

51.

An assessment of our performance over the past five years 1980-81 to 1984-85 on the basis of four principles which we apply to the management of Hong Kong's public finances is at Appendix A of the printed speech (19).

52.

Having

Draft Estimates

completed

completed the background,

of Expenditure,

of Expenditure, the Revenue

revenue proposals for 1985-86.

I now present the Estimates and my

(18)

At 31 March:

1985 1989

($mn) ($mn)

MTRC: guarantee of debt

Export Credit Insurance Corporation:

guarantee of maximum liability

7,024 3,763

3,600 7,000

Home Ownership Scheme: guarantee of mortgages Asian Development Bank: uncalled capital

and unencashed promissory notes

5,092 13,525

363

447

H.K. Building and Loan Agency: guarantee of

notes issued

400

500

H.K. Nuclear Investment Company: loan

guarantee

325

City Polytechnic: guarantee of bank loan Gold coins

260

260

298

400

Demonetized currency notes

10

10

Total

17,047 26,230

(19) The changes in the past few years arising from reductions in capital revenue and from increases in recurrent revenue have been reflected in performance against our guidelines and have highlighted the need to alter some of them. They are now being examined with this in mind.

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