CO129-605-4 Government loans 12-7-1946 - 6-1-1948 — Page 136

(d)

As at present foreseen need for floating

loan for purpose of repaying J.C.F. advances

is not likely to arise for some considerable

time. It would not repeat not be necessary

to make reference in the Ordinance to advance

from J.C.F.

(As regards question of announcement on future of

Hong Kong exchange rate, I fear that announcement

on lines you propose, however carefully worded

to avoid appearance of a commitment to maintain

inevitably stable rate of exchange, will be interpreted as

such a commitment One possibility I have

considered is reference to the fact that H.MG.

have accepted on behalf of all Colonies, etc.,

the obligations regarding variations in exchange

rates laid down in the Bretton Woods Agreements

on the International Monetary Fund.'

The par

value of Hong Kong currency has now been

declared to the Fund as 1/3d and would only

be altered in accordance with the agreed rules

about alteration of exchange rates. It might

be possible to give this indication of stability

of Hong Kong exchange rate, but it would certainly

not be possible to go any further in that direction

140

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foreps to bary present rate I fear there 'se

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may y discourage

investors must,

I feel, be accepted.

and any public reference to this matter would have

to be accompanied by a clear statement that it

cannot be regarded in any way as a commitment to

maintain the existing exchange rate.

If you

think that something on these lines would help

I will go into the matter further.

with reference to suggestion at (b) above for a

sinking fund you may like to consider inclusion

in ordinance of provision permitting Government

to utilize sums provided for sinking fund to make

purchases of the loan stock. Use of this provision

would help Government to support the market in the

stock if that were necessary.

Sicer