160
been set up, apply to Hong Kong as to other Colonial
currencies. The par value of Hong Kong currency has
now been declared by H.M.G. to the Fund as 1/3d and
would only be altered in accordance with 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.
Flo (6)
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,
- see our telegram No.
2. As regards paragraph 3 of the Crown Agent's letter
the disadvantage of a "drawing loan" is that it involves
complete redemption over the period of the loan, while if
statutory
-
a/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 H. K. Government are satisfied it would not
is thus prejudice the successful floating of the local loan) for a 1 10% statutory S.F., leaving the question of a
supplementary sinking fund to be reviewed in say five years
when financial conditions may be more easy. A possible
Treasury Tren
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