the internationally agreed rules about alteration of exchange rates. These do not of course tie Governments completely to existing rates of exchange but their general aim is to ensure as much stability of rates as is practicable. We should therefore be glad of your views as to the form of a statement which might be made which would be as reassuring to investors as possible without resulting in a pledge.
(b) The Governor states that it is desirable that there should be a settlement of the bank liquidation pool account before loan is floated, so as to free funds for investment.
This question has now been
settled separately.
3. As regards paragraph 3 of the Crown Agents for the Colonies letter the disadvantage of a "drawing loan" is that it involves complete redemption over the period of the loan, while if a 1, statutory sinking fund is created Government can still, if it seems wise, create a supplementary fund for the balance. In present H. K. conditions there would seem to be a good case for avoiding large sinking fund contributions and for throwing part of the present burden of rehabilitation on to the future generations who will even at a distance – benefit from the restoration of Hong Kong to normal conditions. Our inclination, which I imagine the Treasury would favour, (provided the Hong Kong Government are satisfied it would not prejudice the successful floating of the local loan) is thus for a 1, statutory Sinking Fund, leaving the question of a supplementary sinking fund to be reviewed in
/say
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