TNAG-2471-FCO40-3595-Confidential-talks-between-the-UK-and-China-regarding-financ-1992 — Page 138

CONFIDENTIAL

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Arguments for greater disclosure

4.

The first

argument concerns accountability. Unlike the use of public funds which is subject to the scrutiny and approval of the legislature, the Financial Secretary has sole discretion in the use of the Exchange Fund.

Section 3 (1) of the Exchange Fund Ordinance specifies that the Exchange Fund;

5.

The control of the be exercised in

"shall be under the control of the Financial Secretary and shall be used for such purposes as the Financial Secretary thinks fit affecting, either directly or indirectly, the exchange value of the currency of Hong Kong and for other purposes incidental thereto, Financial Secretary shall consultation with an Exchange Fund Advisory Committee of which the Financial Secretary shall be ex officio chairman and of which the other. members shall be appointed by the Governor (emphasis added).

The Financial Secretary is required by the Ordinance to consult the EFAC on the control of the Fund. But the Ordinance also distinguishes between "control" and *use*, implying that the Financial Secretary does not have® to consult the EFAC on the use of the Fund, This is of course sensible from a practical point of view, so as to:- enable the Financial Secretary to act promptly, for. example, in exchange rate intervention,

6.

Whilst the Financial Secretary must have the necessary freedom of action, it is doubtful whether there is adequate accountability. The Financial Secretary is, of

accountable. to the Governor who has Overall: responsibility on. Hong Kong. His actions involving the

course,

Fund are also in

as sense accountable to the Director of

Audit as the latter sees everything. He is advised by the membership. appointed on an ad personam basis

EFAC with

a

and proceedings kept confidential,

CONFIDENTIAL

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