TNAG-2101-FCO40-2990-HM-Overseas-Civil-Service-(HMOCS)-policy-matters-1990 — Page 118

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4

the staff suggestions.

We

are therefore conducting a

thorough examination of the proposals put forward.

So far,

we have established that full funding of pensions is not a

feasible option. We need to conduct further studies before

we can reach a firm conclusion on the other suggestions, but

we shall be pleased to inform the Chinese Side of our initial

assessments.

9.

Q

Full funding of pensions is not possible because

some $120 billion would be required to generate sufficient

income to meet the pension liabilities accrued by 1997. The

size of the fund is prohibitive and Cannot

annot be established

without borrowing on a massive scale or sharply increasing

rates of taxation, neither of which can be contemplated.

Further, the fund would deplete the fiscal reserve and reduce

Government's overall credit standing and make its ability to

borrow in the markets more difficult. It would also unless

invested with the Exchange Fund, have a significant impact on

the ability of the Exchange Fund to maintain the stability of

the currency.

investment of the fund in other

currencies

3

Offshore

would have

serious

implications

on

the

international value of the HK dollar.

10.

of

As regards the option of partial funding

pensions, staff have suggested that a reserve fund should be

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