IMF says Linked Exchange Rate system remains the best arrangement

The Linked Exchange Rate system was described as superior.

In its Staff Report on Hong Kong to elaborate on the assessment in the Preliminary Conclusions released last December, the International Monetary Fund reiterated that the Linked Exchange Rate system remains the best arrangement for Hong Kong.

“The IMF Staff Mission to Hong Kong considered that the arguments for maintaining the Linked Exchange Rate system are compelling, given that it has generated substantial benefits in terms of monetary and financial stability, built up a stock of credibility over the decades, and kept the real exchange rate of the Hong Kong dollar broadly in line with fundamentals,” said an announcement.

The requirements for sustaining the current system are said to be in place. The announcement added, “The Linked Exchange Rate system is superior to other exchange rate regime options in the case of Hong Kong.”

The Mission noted that the economy has been negatively affected by the weak external environment but the domestic demand has been resilient, buoyed by a healthy labour market and supportive fiscal policy. Hong Kong's economy is forecast to recover to around 3 percent in 2013.