TNAG-0380-FCO40-426-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 74

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(4) IT SEEMS IMCOMPATIBLE WITH THE UNDERLYING PURPOSE OF THE AGREEMENTS TO REQUIRE US TO MAINTAIN AN M.S.P. (PARAGRAPH 3 OF THE DECLARATION) WHILE, AT THE SAME TIME, LIMITING THE BALANCES ELIGIBLE FOR GUARANTEE TO THE LOWER OF THE BALANCES ACTUALLY HELD ON 24TH SEPTEMBER OR ON THE LAST WORKING DAY OF MARCH (PARAGRAPH 4), PARTICULARLY AS EXTERNAL RESERVES ON GOVERNMENT ACCOUNT TEND TO INCREASE IN THE LAST HALF OF EACH FISCAL YEAR (FOR BUDGETARY REASONS AND BECAUSE THE NOTE ISSUE EXPANDS).

2. THIS TELEGRAM WAS DRAFTED BEFORE HADDON-CAVE LEFT FOR TOKYO LATE THIS AFTERNOON AND I SHOULD BE GRATEFUL

IF YOUR REPLY COULD BE COPIED TO HIM THERE,

3. PLEASE PASS A COPY TO SIR MURRAY MACHELHOSE WITH

REFERENCE TO HIS TELEGRAM 899.

NORMAN-WALKER

[NO ACTION TAKEN BY COD RE: PARAGRAPH 3]

CRWELL DISTRIBUTION

FR D

HKIO D

-2-

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