At
The Exchange Fund Ordinance provides (Section 3(2)) that "The
Financial Secretary may borrow for the account of the Fund
either in Hong Kong or elsewhere on the security of any asset held by the Fund or on the general revenue of the Colony." first sight therefore even if the Secretary of State did
transfer his control over the borrowing powers of the Exchange
Fund to Legislative Council he would be transferring those powers to the Governor, whom he may direct. But the Legal
Adviser has mid that the effect of an amendment of the sort
contemplated to the Exchange Fund Ordinance might also be to override Clause 24 of the Royal Instructions thus leaving any member of the Legislative Council free to propose a resolution amending the borrowing powers of the fund. The official majority could of course take care of this situation, but it is obviously
desirable to make certain that it could not arise. The Legal
Adviser has said that the amendment of the Exchange Fund
Ordinance could be drafted in such a way as to ensure this.
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It should be noted that although we have told Hong Kong that there are legal difficulties in the way of their proposal we have not explained those legal difficulties. We doubt if they realise that the effect of their amendment as it stands
might be to take away from the powers of the Governor although they may well have contemplated removing the direct control of the Secretary of State over each and every individual amendment
to the borrowing powers.
Hong Kong Department.
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