PRIORITY
CYPHER CAT A
GRPS 200
FROM HONG KONG 2101082
CONFIDENTIAL
CONFIDENTIAL
ORWELL
TO PRIORITY FCO TELNO 799 OF 21 JULY.
YOUR TELEGRAM 700,
STERLING GUARANTEE AGREEMENT.
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IN THE EVENT THE FINANCIAL SECRETARY REPLIED AS FOLLOWS:
QUOTE NO, SIR, DEFINITIVE NEGOTIATIONS HAVE NOT YET STARTED, BUT WE ARE IN CLOSE TOUCH WITH HER MAJESTY'S GOVERNMENT IN THE UNITED KINGDOM. I VENTURE TO SAY THEY ARE VERY WELL AWARE OF OUR ANXIETIES.
OUR STERLING RESERVES ARE STILL VERY SUBSTANTIAL DESPITE THE FACT THAT OUR TOTAL EXTERNAL RESERVES HAVE FALLEN FROM THE VERY HIGH LEVEL REACHED IN MID-1972. WE HAVE, HOWEVER, BEEN ABLE TO BENEFIT FROM THE ARRANGEMENT NEGOTIATED AT THE END OF LAST YEAR FOR THE WITHDRAWAL OF PART OF BANK-OWNED STERLING FROM THE STERLING GUARANTEE AGREEMENT. WE HAVE ALSO DIVERSIFIED INTO FOREIGN CURRENCY ASSETS UP TO THE FULL 11 PER CENT PERMITTED.
I WOULD AGREE WITH MY HONOURABLE FRIEND THAT IN VIEW OF THE UNCERTAINTIES OF THE WORLD MONETARY SITUATION, A DECISION ABOUT THE FUTURE OF THE STERLING AGREEMENTS WOULD INDEED BE HELPFUL. AS I HAVE JUST SAID, NEGOTIATIONS HAVE NOT STARTED, BUT WE ARE IN CLOSE TOUCH WITH HER MAJESTY'S GOVERNMENT IN THE UNITED KINGDOM AND I WOULD ASK HONOURABLE MEMBERS TO ACCEPT MY ASSURANCE THAT THE GOVERNMENT IS WELL AWARE OF THE VERY GREAT IMPORTANCE OF THESE ISSUES AND IS KEEPING THE SITUATION UNDER CONSTANT REVIEW UNQUOTE.
2. UNOFFICIALS DID NOT PRESS THE FINANCIAL SECRETARY TOO HARD WITH SUPPLEMENTARIES, BUT PRIVATELY INDICATED CONSIDERABLE UNEASE.
CONFIDENTIAL
13. I HOPE, THEREFORE,
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