HONGKONG'S defence budget will shrink by $74.6 million (4.2 per cent) next year as the British garrison continues to be run down with the approach of 1997. Recent weakening of sterling against the Hongkong dollar also helps account for the smaller budget. The estimated cost of covering maintenance of the garrison, its associated capital and government defence projects for 1993-94 is $1.715 billion, compared with the 92-93 estimate of $1.79 billion. Under the 1988 Defence Costs Agreement the Hongkong Government pays for 65 per cent of the garrison's recurrent costs, plus the full cost of capital works and maintenance. A total of $1.598 billion is earmarked for garrison running costs. This is down $54.5 million (3.3 per cent) on last year.