IMF lauds HK's exchange rate system, policy framework

Hong Kong's Linked Exchange Rate system and the government's policy framework to support growth and safeguard financial stability were strongly endorsed an International Monetary Fund Staff Mission.

The assessment was made in the preliminary conclusions of the mission published today, according to the Hong Kong Monetary Authority .

It said the mission considered the LER system the best option for HK as it "is a simple, credible and effective exchange rate regime, and as such merits continued support".

The mission considered HK's dynamic and compelling rebound following the global financial crisis was underpinned by its concerted policy efforts, flexible economic system and strong up-drafts from Mainland China.

HK Financial Secretary, John C. Tsang, said the IMF Mission has given a positive assessment on the special administrative region, having regard to its sound economic fundamentals and effective economic policy framework.

"We will keep a close watch over global developments and take appropriate measures against any possible adverse events," he said.

Meanwhile, HKMA chief executive, Norman Chan, the authority would remain vigilant and prudent while the external environment has become increasingly uncertain.

"We are ready to deploy appropriate measures as necessary to protect monetary and banking stability in HK," he said.

With external demand weakening, the IMF Mission has projected that HK's economic growth will ease to 5.75 per cent this year and moderate to four per cent in 2012.

It has also commended the government's measures in the property market, which have been effective in lowering transaction volumes, restraining credit for housing and preserving the health of the banking system.

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