SECRET
11
would then be reduced to cover a lower percentage than 75% of the
banks' sterling. Naturally under this arrangement the Government's
holdings would increase but would be covered 100% by the guarantee.
Time, however, is short and it follows that it will be
necessary for an early decision to be taken whether to offer such a
special arrangement to Hong Kong where the Government would need to
make preparations, inter alia, for the printing of short-term paper
in advance of the first issue on 25th September. There would also
nood to be prior consultation with the banks to negotiate the technical
details including the rate of interest to be offered. If this time
limit could not be met, and an affirmative decision had been taken by
H.M.G., it would probably be necessary to offer a 100% guarantee of
both the Government's and the banks' sterling for a strictly limited
period pending the introduction of the linked guarantee scheme.
1st August 1973
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