J
MRS. HEDLEY-MILLER
жила
Copy to: Mr. Marshall
Cori Tie Faber &
Mr. Holland 25 SEP 1973
ec Sir D. Warsom
CONFIDENTIAL
REGISTRY M.
27
SEP 1973
HKRSY
HONG KONG:
c.c.
You
Metody Mr. Start (HKIOD)
PA
28.17
Com
Lith
22574
Mr. Corlett) For information Mr. Maughan)
Mr. Mitchell (o.r.)
Mr. Walker
Mr. Cambridge - F.C.o.
STERLING AGREEMENT
This is to record that you and I and Mr. Payton of the Bank
of England 'spent a great deal of time at Dar-es-Salaam talking to
Mr. Haddon-Cave.
2.
The difficulties of discussion were aggravated because of
Mr. Haddon-Cave's ignorance of Hong Kong's current sterling position. But he and Mr. Payton agreed on a paper (copy attached) which set out such information as was available, together with two sets of hypothetical calculations of the prospective position at 24th September.
The se
in effect represented the extreme limits of what might in practice prove to be the situation. At one end of the spectrum, Hong Kong's sterling holdings might amount to some 86% of total external reserves, and it should not be difficult for her to get back to her MSP of 89% fairly quickly. At the other extreme, Hong Kong's sterling might amount to no more than about 78% of external reserves, and MSP would
be virtually impossible to achieve.
3. I explained to Mr. Haddon-Cave the great difficulties that we
On the other hand we should see in a straight reduction of MSP. were prepared to be flexible, in the light of Hong Kong's special circumstances, about the requirement to hold MSP from the beginning
of the six month's period for which the offer ran.
4.
I then proposed to him the following form of words as the basis
on which Hong Kong and the U.K. might proceed:
"It is understood that in principle Hong Kong will participate
The hasie on which the muarantee will apply
+he
"ran
anta.
163
Page 270Page 271