TNAG-0382-FCO40-428-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1974 — Page 85

XCS(73)9

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Statement III:

Position after 24th September 1973

(after allowing for compensation payments in sterling in settlement of Exchange Fund Guarantee Scheme and on assumption that bank-owned sterling assets are not covered by a further arrangement through the Exchange Fund)

£mn

(1) Sterling assets

347

(2) Non-Sterling assets

82

(3) Total Official Sterling Reserves

347

(4) Total Official External Reserves

429

Minimum Sterling Proportion

80,9%

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The restoration of our M.S. P. to 89% could be effected

in three ways:

(a)

by persuading the banks to re-wind their positions by purchasing sterling against foreign currencies or Hong Kong dollars;

(b)

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(c)

by the Government (Exchange Fund and General Account) buying sterling assets worth £257 million (Statement II: £407 million + £257 mn =

£664 mn

= 89% of £746 mn)

or £317 mn (Statement III: £347 mn + £317 mn = £664 mn = 89% of £746 mn);

by Government switching non-sterling assets........... worth about £28 mn (Statement II: £82 mn -

£28 mn = £54 mn = 11% of £489 mn)

or £34 mn (Statement III: £82 mn

£34 mn

£48 mn = 11% of £429 mn) into sterling assets,

£s regards (a): there is no chance that the banks would wish to do this particularly as there can be no question of another Hong Kong dollar guarantee through the Exchange Fund and a US dollar guarantee is unlikely to be acceptable to them. As regards (b):

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