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HKK5710
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~~~ No. 51 29 JUL 1969
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Cops AB not own
LEPAD
Financial Policy and Aid Department
Amendment of Hong Kong Exchange Fund Ordinance
The limit of borrowing for the account of the Exchange Fund is specifically laid down by Sect. 3(2) of the Exchange Fund Ordinance (Cap 66). It cannot be changed except by amendment of the legislation. Under R.I. 26 the Secretary of State's approval is required before the Governor can assent to legislation affecting the currency of the Colony.
2.
Borrowing for the account of the Exchange Fund has been
used as a device to draw the sterling assets of Hong Kong
banks under the umbrella of the Sterling Area agreement with the Colony. The borrowing limits have consequently needed upward revision. Delays have occurred in effecting revision, partly because the Treasury have needed to satisfy themselves about the extent to which the Fund is being used to give cover to private holdings of sterling and partly because of the legislative process of amending the Exchange Fund Ordinance. In the latter context Hong Kong has asked whether we would
agree to an amendment of the legislation to provide for the borrowing limit to be fixed by resolution of the Legislative
Council.
3. The need to maintain the Secretary of State's control of
the borrowing limit for the purposes of the Sterling Area agreement may disappear under arrangements now being discussed with Hong Kong. Such a use of the control must in any case be regarded as a temporary need. Whether or not, and in what manner, we should accept Hong Kong's request must depend therefore on wider considerations i.e. our requirements for
maintaining effective control over the management of the Colony's currency.
3/640
On this point this department is unable to express a view. We do not know why Exchange Fund legislation has prescribed an upper limit on borrowing (and so reserved control of that limit to the Secretary of State) but presume that it is a common
provision in Colonial currency legislation and is there for a
specific purpose.
/ 5.
No comments yet.
Private notes are available after approval.