TNAG-0381-FCO40-427-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 80

MRS HEDLEY-MILLER

*

STERLING ARRANGEMENTS

SECRET

2F(RMSA) 120/02

cc Mrs Boothroyd

Mr St Clair-

Mr S W Payton (Bonk of England)

Following discussions at Dar es Salaam and subsequent exchanges

at official level, decisions are now required on problems that Of have arisen in respect of the unilateral guarantee offer. the five major official holders of sterling, Kuwait and New Zealand have indicated their intention to comply with the terms of the offer, but Australia, Hong Kong and Ireland have asked for modifications. The paper below describes what is involved and makes recommendations in the light of the discussion that we have had with the FCO and Bank of England.

Defection

2. The starting point is that we should ensure if at all possible that these major holders accept HMG's offer. by any one of them would entail not only a direct risk of diversification by the holder concerned, in itself unwelcome enough, but also a wider risk of eroding confidence in the viability of the guarantee arrangement and the willingness of

On the other hand, individual others to participate in it. concessions may themselves involve diversification.

Moreover,

many holders have changes that they would like to press, mostly in the direction of lower MSPs, and individual modifications that are judged to be worth accepting in the interest of ensuring

1

SEGRET