TNAG-0379-FCO40-425-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 196

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draw dollars or other foreign currency from the BIS to the extent

that gross sterling balances of the OSA, both official and private,

fell below £3,080. (which was the basis for the First Group

Arrangement of June 1966). Concurrently with renewal of the Sterling

Agreements to September 1973 the facility was extended to enable the

UK to be eligible to draw until September 1973 and the repayment

schedule was correspondingly lengthened. Drawings were not available

to finance either UK balance of payments deficits or falls in NSA

balances. The amount available was $2,000 mn. which could be drawm

over 3 years and repaid over 10 years (with five years' grace).

Sterling Agreements

The UK has Sterling Agreements with fifty-six independent

countries and dependent territories and with five currency boards.

Under these Agreements each signatory agrees to maintain a minimum

proportion of its total reserves in sterling in return for a guarantee

of the US dollar value of the major part of signatories' sterling

balances at the rate of US $2.40 - £1, the parity when the Agreements

were originally signed in 1968. (More precisely, the guarantee is

on total sterling reserves less 10% of total reserves or sterling

equities held, whichever is the greater.) The minimum sterling

proportions (MSP's) which each signatory must maintain were ly

based on the actual composition of their reserves in 1968.

of the Agreements (including those with most major signatories) were

signed initially for 3 years. When these were extended for a further

two years in September 1971 a 10% all-round reduction of MSP's was

made (eg an MSP of 50% became 45%). Actual MSP percentages for

individual Sterling Agreement countries are confidential between the

UK and the signatory, though some countries have published their MSP

:

eally

About half

a4

?

A