TNAG-0448-FCO40-513-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1974 — Page 32

CONFIDENTIAL

however, to decide the amount of any excess over the £6.8m end- February deficiency that can be allowed; interest accruals total £4.7m, the topping-up purchases included in the Bank's statement £4.Om, and the excess of receipts over payments £0.2m.

Indications

in March were that interest accruals and necessary topping-up purchases could total up to £10m :

19 March (telex to Bank

from Accountant General)

£4m

(implied as

additional to

accrued interest)

20 March (understanding recorded

in your letter to Mr Payton)

£10m

27 March (Hong Kong telegram

No 375)

£5m

(after allowing

for interest

accruals')

Once end-February holdings were known, there was no need for Hong Kong to make purchases with a safety margin so far as topping-up was concerned; any safety margin that existed related to her attempt to meet the March MSH/MSF requirement (which in the event she failed to do on the basis of the 78.8% MSP).

12.

This decision need not be affected by our failure to comment on the presentation given in Hong Kong Memorandum for Executive Council headed as being for discussion on 23 April

which gives a figure for official sterling holdings (£298m) which is similar

The 8% to that now included in the Bank's statement (£298.7m). fall during March in the FT-Actuaries index of 20-year government stocks might, I suppose, have suggested to us a very considerable fall in the market value of the £306.1m held at end-February, which would have needed boosting by more than March interest accruals and the topping-up purchases implied by the end-February deficiency if the total of £298m at end-March prices was to be reached; but we did not, of course, have the knowledge of the composition of the Hong Kong portfolio necessary to make the necessary calculations.

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