CO129-605-4 Government loans 12-7-1946 - 6-1-1948 — Page 79

ALL COMMUNICATIONS

TO BE ADDRESSED TO THE

CROWN AGENTS FOR THE COLONIES.

THE FOLLOWING REFERENCE AND THE

DATE OF THIS LETTER BEING QUOTED.

A/1796

TELEGRAMS

[INLAND: "CROWN SOWEST LONDON."

OVERSEAS: "CROWN LONDON."

TELEPHONE: ABBEY 7730.

CROWN

AGENTS

FOR

COLONIES

THE

4, MILLBANK,

27

LONDON, S.W. I.

21st July, 1947.

(56)

X

Dear Palmer,

You may like some comments from us on Hong Kong's telegram No.1152 of the 16th July.

We need say nothing on the general principle of the investment of a part of the Exchange Fund in local securities in view of the discussion which took place on this question at the meeting of the Finance sub-committee of the Colonial Economic Advisory Committee on the 16th October, 1945.

2.

You are no doubt aware that we have on several occasions, orally and in writing, raised with the Colonial Office the question of investing a proportion of the Exchange Fund's deposit with the Joint Colonial Fund (earning at present 12%) but that we have been asked not to press the question. The objection to our suggestion, in so far as it was based on a reluctance to provoke the Treasury by increasing income accruing to Colonies on their sterling balances, does not of course, apply to the

(54) present suggestion but the statement in paragraph 3 of the Officer

Administering the Government's telegram of the 25th May, that it is immaterial whether the money is deposited with the Joint Colonial Fund or loaned direct to Hong Kong, takes no account of the fact that the deposit in the Joint Colonial Fund is repayable at call. (56) 3.

As for paragraph 5 of the telegram of the 16th July, See (37) I pointed out in my letter of the 3rd January to Mayle that if

the Crown Agents were to be appointed trustees of the sinking fund under the provisions usually contained in Colonial ordinances,

On a provision like the one suggested would be inappropriate. further consideration we feel that there would be no objection to a provision on the following lines (based on the Tanganyika Guaranteed Loan Ordinances):- "The Crown Agents shall apply such money to the purchase of the bonds or shall invest it in the

other purchase of such ecurities as may be approved by the Secretary of State."

4.

It may be, however, that Hong Kong intend to model the sinking fund provisions on those in Ordinance No.15 of 1933, in which case purchases of the bonds could be made by the Governor and the balance of contributions remitted to us for investment, as has been the practice in the case of the sinking fund set up under the above Ordinance.

5.

In either case we should suggest the omission of the Conditions may be limitation of purchases to prices below par. such that, even above par, the bonds may be the best investment for the sinking fund.

H.Palmer, Esq., 0.B.E.,

Colonial Office,

Downing Street,

S.W.1.

a

16. We assume

EA