CONFIDENTIAL
XCCI(93)2
20
We also stressed that although the rate of consumer price inflation was still at a relatively high level, it had moderated. The inflation rate for 1992 was likely to be very close to the forecast figure of 9.5%, compared with 12% for 1991. While a sustained high inflation would reduce Hong Kong's external competitiveness in the longer term, the price competitiveness of our exports was unaffected and experience showed that our economy was highly flexible and could adjust resiliently to downside external shock.
Overall remarks
21
The mission stressed that their overall assessment of Hong Kong was highly positive. Their note of caution on the inflation problem by no means indicated that they had overlooked the substantial efforts Government has made to relieve inflation. Their approach in Article IV consultations was to examine the problem from a different perspective and suggest possible measures for Government to consider. The mission appreciated that practical and political considerations would need to be taken into account in assessing the feasibility of their suggestions.
ASSESSMENT
22
This was a useful continuation of the Article IV consultations exercise started in 1990. It gave Hong Kong a continued opportunity to explain directly and in depth the rationale for our policies and to foster closer integration with the international financial community. The presentation to the IMF Executive Board of the background paper and staff report on Hong Kong will remain separate from that on the UK now and China after 1997, thus underlining Hong Kong's financial and monetary autonomy.
CHANGE IN CONSULTATIONS ARRANGEMENTS
23
Hong Kong was placed temporarily on the bicyclic procedure in November 1991 to help relieve the pressures placed on the IMF staff caused by the expansion of the Fund's operation in the Soviet Union. The IMF has since reviewed the temporary arrangements for consultations and recently decided that as from 22 November 1992, the temporary arrangements would cease. As part of these changes, Hong Kong would revert to the standard 12-month consultation cycle.