CONFIDENTIAL
These comments are, of course, made with the benefit of hindsight
But they support and are not relevant to the topping-up question.
a point made in Mr Haddon-Cave's personal telegram to Mr Barratt · of 2 April (Hong Kong telegram No 396) and contribute to the unease expressed below (paragraph 17).
THE MSP AND THE SIZE OF END-MONTH DEFICIENCIES
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6. However, it seems that the deficiencies which Hong Kong has been trying to make up have been larger than those we had in mind
This is because (and which are incorporated in the Bank's tables).
Hong Kong appears not to have taken on board our rounding down from 78.8% to 78.0% of the sterling proportion on 26 September 1973 which we accepted should be the MSP following the adoption last November by Hong Kong of market valuation.
7. Hong Kong telegram No 1361 of 27 November 1973, which announced the change to market valuation, said that
"after allowing for interest credits we shall have to top up by £5-6m at the end of November in order to maintain a position for the purposes of the guarantee of £313m." Our reply, FCO telegram No 1226 of 29 November, said after conceding that market valuation should be used, that
'We are thus prepared......to agree to treat the references in paragraph 3 of the Declaration to MSP fixed for the purposes of the Sterling Agreements as references to a MSP of 78%.'
September sterling holdings of £312,945,000 were 78.8% of total reserves; an MSF of 78.0% gave a September based MSH of £309,876,000, an amount £3,069,000 lower.
8.
Despite this, the Hong Kong reporting letter of 11 February 1974 (referred to in paragraph 2 above) referred to an 'agreed minimum of £313 million' (though the letter from Mr Payton of 28 February under which the Bank sent the reporting letter to the Treasury began with a reference to a MSH at £310m). Again,
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