HONG KONG LEGISLATIVE COUNCIL
香港立法局————— 一九八九年七月十九日
19 July 1989
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otherwise be incurred. In effect, the bulk of the fiscal reserve is placed "on deposit" with the Exchange Fund, earning a market rate of interest. At the same time, this puts additional resources at the disposal of the Exchange Fund to better enable it to carry out its function, as necessary, of maintaining the stability of the Hong Kong dollar.
The amount transferred to the Exchange Fund is published. The monthly accounts of the General Revenue Account and the major funds are published in the Government Gazette and the final accounts of Hong Kong are presented in the Director of Accounting Services report which is laid before this Council in the autumn of each year. This report shows details of the General Revenue Account and the various funds as well as a consolidated account. It also explains the accounting policies adopted in the accounts, significant items and the application of balances, including the fiscal reserve.
In this connection, since neither the General Revenue nor the Exchange Fund is a separate legal entity, it has been determined that the transfer of money from one to the other does not constitute a borrowing. The transfer, therefore, is not subject to the provisions in the Exchange Fund Ordinance restricting the powers of the Financial Secretary when he borrows for the account of the Exchange Fund, such as the borrowing limit of $50 billion in section 3(4) of the Ordinance.
Members may recall that the borrowing limit was last raised by resolution in this Council on 11 March 1987 with the approval of the Secretary of State. It was agreed then that the limit had to be raised to accommodate further transfers from the General Revenue as the fiscal reserve grew. Subsequent extensive research on the legal position carried out in connection with the proposal to issue Exchange Fund Bills has indicated that such transfers fall outside this limit. This subject is addressed in greater detail in the Appendix.
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Appendix
Section 3(3) of the Exchange Fund Ordinance specifies that the Financial Secretary may borrow for the account of the Fund either in Hong Kong or elsewhere on the security of any asset held by the Fund or on the General Revenue". The policy behind this provision, read in conjunction with the borrowing limit in section 3(4), is to limit the power of the Financial Secretary to charge the assets of the fund or of the General Revenue as security for
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