Investment return on Hong Kong fiscal reserves declines over past six years

The contribution to the public coffers of investment income from Hong Kong’s fiscal reserves has been falling in the past six fiscal years, even though more money is being placed with the Exchange Fund for investment, a research paper by the Legislative Council Secretariat showed.

The report, released yesterday, showed that investment income from the fiscal reserves represented only 5.8 per cent of total government revenue in the current fiscal year, which ends today.

This compares with 8.1 per cent in 2013-14 and 8.5 per cent in 2012-13. The rate has been declining since 2008-09, when investment income accounted for 14.6 per cent of total government revenue.

“This was notwithstanding the surge in the amount of the fiscal reserves placed with the Exchange Fund during the period, which increased by 66 per cent from HK$494.4 billion in 2008-09 to HK$819.6 billion in 2014-15,” the report said.

The report attributed the low returns partly to the current arrangement of placing the fiscal reserves with the Exchange Fund investment portfolio, which limits investment options mainly to bonds.

In the current fiscal year, the investment income from the fiscal reserves is estimated to fall to HK$27.5 billion, from HK$36.8 billion in 2013-14 and HK$37.7 billion in 2012-13.