CONFIDENTIAL
ון - **RECF
12th March 1974.
21
i
Dear St.Clair,
RECE
18 MAR 1974
Гакк
5/10
Now Unilateral Guarantee: llong Kong
Thank you for your letter of 8th March about the proposed
Declaration.
I certainly agree that the wording of the Declaration
should exclude locally held sterling from balances eligible for
guarantee. All of Hong Kong's official sterling is in fact held in
London and I do not think this restriction will deprive the Colonial
authorities of a facility which might prove useful to them during
the nine months' life of the new Declaration. You will remember
that I was in Hong Kong when the formula for adjusting the MSP to
exclude locally held sterling was developed and I consider it
unlikely that Haddon-Cave would object to losing a facility which he does not need anyway.
Nor does the prospect of Hong Kong comparing notes with
Abu Dhabi cause me concern. The circumstances which gave rise to
locally held sterling being covered under the original Sterling
Agreements for the two territories were altogether different. In
the case of Hong Kong the provision was designed to bring bank-owned
sterling under the umbrella of IMG's guarantee because the Financial
Secretary at the time maintained that it constituted part of official
reserves. For Abu Dhabi, however, it was simply intended to
perpetuate traditional arrangements under which the Ruler deposited
a substantial part of his sterling with local banks.
In all the circumstances, I share your view that there are
no grounds for prior consultation with lladdon-Cave regarding the
proposed definition.
I am sending copies of this letter to Cambridge, Aust and
Crowson.
Yours sincerely,
(Sd.) STANLEY PAYTON
W.L.St.Clair, Esq.
INT