TNAG-1652-FCO40-2300-Hong-Kong-Exchange-Fund-Ordinance-1987 — Page 3

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Sir,

LAST

PAPER

05/1

SPEECH BY THE HONOURABLE THE FINANCIAL SECRETARY IN LEGISLATIVE COUNCIL: WEDNESDAY 11 MARCH 1987

MOTION ON THE EXCHANGE FUND ORDINANCE)

In moving the Second Reading of the

Appropriation Bill 1987 a fortnight ago, I referred

to the prudent build up in the Government's fiscal

Indeed, as I said, by the end of the

reserves

(1).

current financial year, our balances on the General

Revenue Account and in the various funds will have

accumulated to about $20 billion and $12 billion

respectively, or a total of $32 billion.

2.

The bulk of the Government's accumulated

balances on the General Revenue Account and in the various

funds is invested by the Treasury with the Exchange Fund

against the issue by the Fund of interest-bearing debt

certificates.

This is done so as to avoid these reserves

having to bear the exchange risks arising from investments

in foreign currency assets, by effectively transferring

the risks to the Exchange Fund. Section 3(4) of the

Exchange Fund Ordinance limits the amount which the Fund

may borrow from any sources; and under section 3(5) this

(1)

/limit

1987-88 Budget Speech, paragraphs 68 and 69.

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