TNAG-0379-FCO40-425-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 232

compared with £122 million and £188 million in the previous year, while Zambia incurred a fall of £50 million, half the size of the fall in 1971. The total reserves of this group of countries were also boosted by SDR allocations of more than £90 million and IMF drawings totalling £70 million, particularly by Pakistan, Bangladesh and Zambia. A large part of the reserves rise, however, remains unidentified and is reflected in the positive balancing item of around £160 million (mainly attributable to Singapore and Hong Kong).

6. The reserves of the oil-developing countries (Nigeria and the Persian Gulf Sheikhdoms) however, rose less rapidly in 1972. The improvement in the current and long-term capital balance was more than offset by Nigeria's repayment of the final outstanding pre- March 1971 import credit (reflected in the net outflow of miscella- neous capital) and large unidentified outflows from both Nigeria and the Persian Gulf Sheikhdoms (reflected in the negative balancing item).

1973 and 1974 Prospects

7. The prospects for 1973 and 1974 are for further rapid rises in reserves in the OSA, though smaller than in 1972, of around £1600 - 1700 million in each year.

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In the developed countries significantly slower reserves rises of around £900 million and £450 million respectively, are forecast. Australia, New Zealand and South Africa's reserves are expected to rise less rapidly Australia's and South Africa's as imports expand and as the net inflow of private capital falls fron the record leveb of 1972. New Zealand's reserves are expected to reflect the adverse effect on export earnings resulting from UK entry into the EEC. On the other hand with improvements in Ireland's current and capital accounts, following her entry into EEC, some recovery in her reserves is forecast.

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The reserves of the non-oil developing countries are also expected to rise much less rapidly in the forecast period, with increases of around £200 million forecast for each year. A deter-

ioration in the current account is expected to be brought about by a worsening of the trade account, as imports rise more rapidly than exports and the net invisible surplus falls.

CONFIDENTIAL

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