GR 350
SECRET
SECRET HKK 100%.
217
54-
DESK BY 100800Z
FM HONG KONG 10064OZ OCT 83
TO IMMEDIATE FCO
TELEGRAM NUMBER 1495 OF 10 OCTOBER
2001933
FOR CLIFT (HONG KONG DEPARTMENT) FROM BREMP IP-DGE: THE EXCHANGE
FUND ORDINANCE.
Sea (70)
ON THE ASSUMPTION THAT THE EXECUTIVE COUNCIL WILL AGREE ON 12
OCTOBER TO THE PACKAGE OF MEASURES WHICH WILL BE RECOMMENDED TO
THEM, & SHALL BE GRATEFUL IF YOU COULD OBTAIN THE SECRETARY OF STATE'S APPROVAL IN ACCORDANCE WITH SECTION 3 OF THE ORDINANCE
TO THE TRANSFER OF DOLLARS 250 MILLION FROM THE EXCHANGE FUND TO
GENERAL REVENUE ACCOUNT. THE EXCHANGE FUND AT PRESENT HAS A
197.5 PER CENT BACKING AGAINST THE MINIMUM REQUIREMENTS STIPULATED
HN SECTION 8(A) AND (B) AND TRANSFER OF DOLLARS 250 MILLION TO
G.R. ACCOUNT WOULD REDUCE THE BACKING ONLY TO 166.7 PER CENT.
THE EXCHANGE FUND IS ALSO PARTICULARLY FLUSH WITH HK DOLLARS AT
PRESENT HAVING HK DOLLARS 10.3 BILLION ON CURRENT AND CALL
ACCOUNTS.
2. THE PURPOSE OF THIS REQUEST IS TO MAKE UP FOR THE LOSS TO G.R.
ACCOUNT OF THE ESTIMATED REVENUE FOR THE REMAINDER OF THIS
FINANCIAL YEAR FROM INTEREST WITHHOLDING TAX WHICH WILL BE ZERO
RATED. THE PURPOSE OF THIS ACTION IS TO SUPPORT THE EXCHANGE
RATE OF THE HONG KONG DOLLAR, WHICH WE BELIEVE TO BE A FALR
CHARGS ON THE EXCHANGE FUND, ALTHOUGH IT SHOULD PERHAPS BE POINTED
OUT THAT IT IS NOT NECESSARY UNDER THE ORDINANCE TO SPECIFY THE
PURPOSE OF ANY TRANSFER - ONLY THE DESTINATION NEED BE MENTIONED.
3. WE THINK IT IMPORTANT NOT TO LET THE FORECAST BUDGET DEFICIT
GET OUT OF HAND IN ANY WAY.
4. THERE ARE PRECEDENTS FOR SUCH TRANSFERS. APPROVAL TO TRANSFER
MONEY CUT OF THE EXCHANGE FUND WAS LAST SANCTIONED IN 1966
(SEE YOUR SAVING NUMBER 1523 OF 5.6.56 UK REFERENCE AND
765/51/01), BUT THIS MONEY (POUNDS 5 MILLION) WAS NOT DRAWN. HOWEVER, IN 1964 AN AMOUNT EQUIVALENT TO POUNDS 9,375,000 (HK
DOLLARS 150 MILLION) WAS ACTUALLY TRANSFERRED TO THE DEVELOPMENT
LOAN FUND FROM THE FUND.
YOUDE
LIMITED
ноінко
HDI ERD (MR APPLEYARD)
Ps
PS/MR LUCE
Psi Pus
MR GIFFARD
MR EVANS MR DONALD
SECRET
COPIES TO MR LITTLER, TSY
MR D HOLLAND, B/ENGLAND.
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