CO129-514-4 Repayment of excess military contributions advanced by Hong Kong 9-1-1929 - 10-1-1930 — Page 32

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despatch No.8 of 20th January, 1890. In adopting the decision above indicated, Her Majesty's Government have been largely influenced by the consideration that, long as the contribution is fixed in sterling, the continued uncertainty in the matter of exchange is calculated to cause a greater dislocation in the finances of the Colony than would be caused to the Imperial finances if the contribution is fixed in dollars.

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I am also to observe that adjustments in respect of overpayments of the contribution were made in dollars by Hong Kong for the Colonial years 1920 and 1926 when the Colony deducted from the current payments, certain overpayments of dollars made in previous years owing to the Colony over-estimating their Revenue and correspondingly 20% of such Revenue.

As regards the repayment in sterling in 1925 to the Government of the Straits Settlements referred to in the last sentence of paragraph 4 of the Governor's despatch, it is immaterial in the case of the Straits Settlements whether refunds of overpaid Military Contribution are effected in dollars or in sterling, as owing to the rate of exchange of the Singapore dollar being stable the payment represents the same amount whichever currency is adopted.

With regard to the review of the method of arriving at the actual number of dollars to be repaid, there are two points of criticism in the Governor's despatch (a) the rates of exchange to be used in converting into dollars the cost of the garrison expressed in sterling and (b) the method employed of dividing the cost of the garrison over the year.

As regards (a) the Council adopted the official rates of exchange fixed by the Treasury as these would appear to be the appropriate rates to use for official transactions. The official rates of exchange are calculated upon the commercial rates of exchange but operate about 5 weeks in arrear. In view, however, the rapid increase in the rate of exchange during the period when the overpayments were made the Council are prepared, without prejudice to the method to be adopted in any similar case in future, to base the present refund upon commercial rates.

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