TNAG-2146-FCO40-3065-Hong-Kong-Port-and-Airport-Development-Strategy-(PADS)-1990 — Page 11

Mr Macleod: Well, I am not sure, I am not quite 'sure Mether that is what was being said or not. I don't really want to comment on what someone else has been saying or we start getting a sort of public debate. But perhaps I could just try and tackle this confusion which sometime arises between government fiscal reserves and the Exchange Fund.

I have tried to tackle it before but I know it continues to cause problems. The government fiscal reserves, which is whạt I deal with in dealing with government expenditure and revenue, are merely the accumulated surpluses of the government. That is to say that every year we make a surplus we add to our reserves and every year we make a deficit we subtract from them.

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Quite separately from that is the Exchange Fund which exists for a monetary purpose for the backing of the Hong Kong dollar. Now it is true that their is a connection between them and only one connection. And the connection is this: We have to bank our reserves somewhere. We have to put them somewhere. We are not using them. While we are not using them they have to be banked. So, the government uses both the banks, the commercial banks, and the Exchange Fund as somewhere to deposit the reserves. We then draw upon those reserves back from the Exchange Fund or back from the banks when we need them. That is where the potential confusion occurs. But the role of the Exchange Fund is not dependent on those deposits of the Hong Kong Government's fiscal reserves. It has its own finances. It has its own resources. And it can fulfil its functions whatever the Hong Kong government reserves deposited with it may be.

So that is the position. And as I have said before, in all our forecasts and financial planning we do not assume that we get anything from the Exchange Fund, other than,

of course, the reserves that we

we have deposited with them. dealing with government fiscal reserves.

So we are only

Question Eight: Lu Ping has said this morning that the Exchange Fund is thirty billion dollars. He is obviously confused still as much as we are. Is he, do you think he is, talking about thirty billion of the government's fiscal reserves that are in the Exchange Fund at the moment?

Mr Macleod: Again, I don't want to comment directly on what Mr Lu Ping may or may not have said. But, the only figures, really, that I can deal with are that our government fiscal reserves are over seventy billion Hong Kong dollars. Now, what is in the Exchange Fund I don't know. Because that is kept...

Miss Yue: There is an advisory committee on the Exchange Fund which looks after that particular side of things. As far as the government fiscal reserves are concerned, as at the first of April 1990 it stands at over seventy billion Hong Kong dollars.

Question Nine: That does not include any money that is in the Exchange Fund?