TNAG-0448-FCO40-513-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1974 — Page 142

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ORWELL

TO PRIORITY HONG KONG TELNO 309 OF 26 MARCH, 1974,

PRESENT STERLING GUARANTEE,

1. IT APPEARS FROM CONTACT BETWEEN YOUR ACCOUNTANT GENERAL AND PAYTON OF THE BANK OF ENGLAND THAT THERE IS A DIFFERENCE BETWEEN US ON THE INTERPRETATION OF THE ACCIDENTAL BREACH PROVISION IN PARAGRAPH 2 OF OUR TELEGRAM NO 1269 OF 26 NOVEMBER 1973 WHICH PROVIDES THAT A PURELY ACCIDENTAL BREACH AT THE END OF ANY ONE MONTH WILL BE OVERLOOKED PROVIDED THERE IS NO BREACH AT THE END OF THE FOLLOWING MONTH,

2. WE NOW UNDERSTAND THAT THE ACCOUNTANT GENERAL HAS INTERPRETED THIS PROVISION TO MEAN THAT IF HONG KONG FALLS BELOW MSP ON ANY ADVICE DAY, HMG WILL REGARD THE BREACH AS ACCIDENTAL PROVIDED THAT. AN AMOUNT OF STERLING EQUIVALENT TO THE AMOUNT OF ANY BREACH AT : THE END OF ONE MONTH IS PURCHASED IN THE FOLLOWING MONTH, WE DO NOT ACCEPT THIS AS A PROPER INTERPRETATION OF THE PROVISION AND CONSIDER THAT THERE ARE ADEQUATE GROUNDS FOR CONCLUDING THAT THERE HAS BEEN A BREACH OF THE DECLARATION.

3. HOWEVER, WE ACCEPT THAT THERE HAS BEEN A GENUINE MISUNDERSTANDING ON THE PART OF HONG KONG AND THAT PURCHASES OF STERLING HAVE BEEN MADE IN GOOD FAITH ON THE BASIS OF YOUR INTERPRETATION OF THE PROVISION. EXCEPTIONALLY, THEREFORE, WE WOULD BE PREPARED TO ALLOW YOUR INTERPRETATION FOR THE PURPOSES OF SATISFYING THE CONDITIONS IL PARAGRAPH 3 OF THE EXISTING DECLARATION. THIS CONCESSION IS GIVEN ON THE CONDITION THAT, FOR THE PURPOSE OF CALCULATING THE BALANCES ELIGIBLE FOR GUARANTEE ON THE LAST YORKING DAY OF MARCH 1974, OFFICIAL STERLING RESERVES WILL BE DEEMED TO CONSIST OF THE AMOUNT OF ACTUAL HOLDINGS ON THAT DAY OR/THE AMOUNT HELD ON 20 FEBRUARY PLUS THE STERLING WHICH, IN ACCORDANCE WITH YOUR INTERPRETATION OF THE ACCIDENTAL BREACH PROVISION, WAS PURCHASED DURING MARCH IN ORDER TO COMPLY WITH THAT PROVISION, WHICHEVER AMOUNT IS LOWER. FOR THIS PURPOSE, VALUATION OF THE HOLDINGS ON THE LAST WORKING DAY

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