TNAG-1641-FCO40-2288-Budget-of-Hong-Kong-1987 — Page 41

67.

Taking the General

Revenue Account surplus together

with this increase in fund balances gives an overall surplus for

the year of $4.9 billion.

68.

In the light of the improvements in 1986-87 I now

expect our general reserves

to stand at around $20 billion at

the end of this year plus balances of a further $12 billion

carried in Our various funds. We have a number of contingent

liabilities and these must be allowed for (21). There is no

absolute rule as to the correct level of reserves. It should be

recognized, however, that although our reserves are increasing

again, they remain in real terms slightly

terms slightly below their level at

the start of this decade before we fell into deficit. And the

average annual surplus of $1.5 billion that we have projected

over the forecast period is no more than sufficient to maintain

the real value of our reserves.

69.

The bulk of the

certificates.

Government's accumulated fiscal

reserves is invested by the Treasury with the Exchange Fund

against the

issue by the Fund of interest-bearing debt

The Exchange Fund Ordinance currently limits the

amount which the Fund may borrow from any source at HK$30 billion, but the limit may be altered by resolution of the

Legislative Council with the approval of the Secretary of

State. Given the prudent build up which we forecast for our

fiscal reserves, it will now be necessary to raise this limit (22), and it is my intention to move a resolution in this Council for this purpose.

ESTIMATES 1987-88

70.

Against this background, I now present the draft estimates of expenditure,

revenue estimates and my revenue

proposals for 1987-88.

(21) Listed in Appendix F.

(22) The limit was last successively raised from HK$7 billion to HK$30 billion during 1980 and 1981 to accommodate the build up of fiscal reserves then.

20

/General