TNAG-0381-FCO40-427-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 81

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participation by Australia, Hong Kong and Ireland must either

be kept secret or must be capable of presentation in a way

that enables us to resist pressure for modifications in

other cases.

3. We have also had in mind in considering these cases that

the object of the unilateral offer was to stabilise official

holdings of sterling and not to induce or require further

sterling purchases above the levels on 24 September.

4.

The problems arising with Australia and Ireland relate to

the currency conversion rates to be used in calculating MSF and

any payments made under the guarantee. The main problem in

the Hong Kong case is that the sterling holdings of the

commercial banks have now fallen to minimal levels and the

fallep

arrangement needs to be adapted to take account of this. The

conclusion of the paper below is that these problems can be

satisfactorily dealt with by modifications to the terms of the

unilateral offer, that the changes can be confined to the three

holders in question, and that the changes should be made in the

interest of avoiding a dropping-out by one or more of

the ge

holders..

5.

Specifically, it is recommended:

(1) that Australia be permitted to continue to

calculate its MSP obligation on the basis of

a parity valuation of foreign exchange holdingo,

but with any payment under the guarantee

calculated on a market rate basis as provided in

the unilateral declaration;