Rare move to take income out of Exchange Fund to pay for Northern Metropolis, other big projects

South China Morning Post · Feb 25, 2026 · Collected from RSS

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The Hong Kong government has produced a consolidated surplus earlier than expected, its first in four years, ahead of a rare transfer into coffers from the Exchange Fund and other sources.Wednesday’s budget pointed to fund transfers of HK$127.83 billion (US$16.35 billion) and an 11.1 per cent jump in government revenues contributing to another surplus for 2026-27, on top of the one for the 2025-26 financial year.“We will bring back about HK$15.8 billion from funds established outside the government’s accounts, and transfer HK$37 billion and HK$75 billion, respectively, from the surplus of the Bond Fund and the investment income of the Exchange Fund to the government’s accounts,” Financial Secretary Paul Chan Mo-po said in his speech.The move to take investment income out of the Exchange Fund – the government’s main investment arm and de facto sovereign wealth fund – was last done in 1984.Chan proposed transferring HK$75 billion in each of the coming two financial years, or HK$150 billion in total, from the Exchange Fund to the Capital Works Reserve Fund to pay for the Northern Metropolis and other infrastructure projects.04:25Record surplus prompts Hong Kong government to offer tax relief, sweetenersRecord surplus prompts Hong Kong government to offer tax relief, sweetenersIn 1984, a HK$250 million transfer from the fund was used to compensate for the loss of revenue resulting from the removal of the tax on interest earned on Hong Kong dollar deposits, according to a Legislative Council document that year.