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limit may be altered by the Legislative Council by
resolution with the approval of the Secretary of State.
The current limit of $30 billion was set by a resolution
of this Council on 9 December 1981. It was successively
raised during 1980 and 1981 from $7 billion to $30 billion
to accommodate the rapid build up of fiscal reserves then.
3.
Speaking in support of the last increase in the
borrowing limit to $30 billion on 9 December 1981, my
predecessor also described an arrangement whereby the
Exchange Fund conducts money market operations with a view
to influencing the level of interest rates in the
interbank market in a way consistent with monetary policy
objectives. This arrangement which remains in operation
and has been useful at times in exerting the appropriate
influence on interest rates, involves the Exchange Fund in
borrowing and lending in the interbank market. Depending
on market conditions and the specific objective, the
Exchange Fund may borrow long term money and lend short
term, or vice versa, or borrow or lend without matching
the transactions. Sums borrowed by the Exchange Fund in
the course of this arrangement must also fall within the
borrowing limit set by section 3(4) of the Exchange Fund
Ordinance.
/4. As at the