960419

ADB clarifies

views on HK

dollar peg

HONG KONG: The Asian Development Bank did not intend to suggest in its recent economic report that the Hong Kong government should change its linked exchange rate policy, the ADB said Friday. "On the contrary, it is the bank's view that the Hong Kong dollar link to the US dollar has served Hong Kong well and that the prospects for the Hong Kong economy remain robust", the ADB said in a release.

In its annual Asian Development Outlook released on April 11, the ADB said Hong Kong needs to review its policy of linking its exchange rate to the US dollar. "This policy will clearly need to be reviewed in the context of Hong Kong's future relations with China, and any changes are likely to have important impacts on investments, prices and trade prospects", the Manila-based institution said in the report.

ADB chief economist Vishvanath Desai later told reporters the peg severely constrains monetary policy in the territory and contributes to high inflation.

While unpegging the currency would permit the most flexible monetary policy, "pegging the currency to a basked would be a step in the right direction", he told Reuters in an interview.

But Desai acknowledged that unpegging the currency before Hong Kong reverts to China in 1997 might not be advisable. In Friday's release, Desai clarified that the analyses and assessments contained in the Asian Development Outlook were in the nature of economic commentary, and not intended to constitute the bank's official position.-Reuter