Sri Lanka rupee pressured as IMF praises Hong Kong currency board

Dec 15, 2008 (LBO) – The International Monetary Fund has praised the robust 'hard peg' (currency board) of Hong Kong with the US dollar even as Sri Lanka rupee's 'soft peg' is under severe pressure from central bank liquidity injections. The Hong Kong Monetary Authority (HKMA) has maintained a fixed exchange rate system or currency board with the US dollar at 7.80 Hong Kong dollars since 1983, achieving low inflation, high economic growth and economic stability for its citizens.

Inside Hong Kong, the currency board system is referred to as the Linked Exchange Rate System.

High Praise

"The mission continues to support the Linked Exchange Rate System," the IMF said after its annual consultations with Hong Kong.

"It is a simple, transparent exchange rate arrangement that has, over the past 25 years, proved to be an anchor of monetary and financial stability in Hong Kong SAR.

"It was also clear, in discussions with both the government and the private sector, that the Linked Exchange Rate System continues to work well, acting as an important anchor of monetary and financial stability."

The IMF's praise for Hong Kong's sustainable hard peg comes two months after the global monetary watchdog sounded war