ASIAN DEVELOPMENT BANK: UK GUARANTEE OF HONG KONG'S
OBLIGATIONS
NOTES FOR SUPPLEMENTARIES AND WINDING UP
Note No A2
The need for an increase in the limit of guarantees to £140 million rather than, say, £120 million
An increase of £120 million would cover Hong Kong's present commitments, and also the purchase of new shares under the third capital increase at the current exchange rate with the US dollar; but it would provide little margin to cover possible future exchange rate fluctuations. The figure of £140 million is considered sufficient to cover such eventualities, for example as occurred early last year, to avoid having to take Parliamentary time to consider another statutory order for such a technical reason.
Background Note:
1.0
Section 7 of the Overseas Development and Co-operation Act 1980 specifies a sterling limit of £90,000,000 for the UK guarantee. Where, as in the case of Hong Kong's obligations to the Asian Development Bank, the obligation is incurred in US dollars, that has to be converted into sterling at the prevailing rate of exchange.
2.
Section 7(1)(b) of the 1980 Act refers to payments needed to maintain the value of subscription payments. This relates to payments by the member in its national currency to maintain the value in US Dollar terms. This is quite separate from the statutory limit specified in Section 7(2) which relates to the sterling equivalent of all Hong Kong's obligations to the Bank, defined in US Dollars. The sterling equivalent total therefore fluctuates with the exchange rate between the US Dollar and the Pound Sterling.