Editorial | As Hong Kong’s economy recovers, it must drive Northern Metropolis
While the government’s proposal to dip into the Exchange Fund is unusual, new economic and geopolitical circumstances call for fresh thinking
The latest government budget proposes transferring HK$75 billion from the Exchange Fund to the Capital Works Reserve Fund in each of the coming two financial years to help pay for the Northern Metropolis and other related projects. It will also transfer another HK$15.83 billion consolidated from several smaller public funds with an unspent balance.
While previous financial chiefs were reluctant to make such transfers, Hong Kong is operating in a different world. The fund has roughly HK$4.1 trillion in total assets and achieved record-breaking performance last year, delivering investment income of HK$330 billion. In other words, the government is only dipping into the fund’s income, which is not even half of the total earned last financial year.
The decision was not made on a whim. The proposed transfers will be vetted by the Exchange Fund Advisory Committee, as well as the chief executive and the Executive Council.
The Monetary Authority, the city’s de facto central bank, has reviewed the numbers and concluded its monetary system remains rock-solid. Even following the transfer of the proposed amount to the government, the fund’s accumulated surplus will be more than HK$780 billion, which, when combined with the foreign currency reserves of more than US$420 billion, translates to formidable financial firepower equivalent to 1.6 times the monetary base.