HKSAR Emblem The 2007-08 Budget The Government of the Hong Kong Special Administrative Region Brand Hong Kong
GovHKTraditional ChineseSimplified Chinese
Search Site Map
Contact Us
The 2007-08 Budget The 2007-08 Budget
Budget Speech
Press Releases
Related Documents
Previous Budgets
Related Links


Budget Speech

Print this page




Fiscal Reserves

76.       It is expected that by 31 March this year, our fiscal reserves will stand at $365.8 billion.  Over the next five years, the fiscal reserves will be maintained at a level between $390 billion and $580 billion.  When I took up office as Financial Secretary, the fiscal deficit problem was very serious, with the Consolidated Account running a deficit of over $60 billion for two consecutive financial years, and the fiscal reserves expected to shrink further.  In view of this, I set the target level of fiscal reserves at an amount equivalent to about 12 months of government expenditure.  The current fiscal reserves have exceeded this level.  However, opinions are divided over whether this target should be maintained.


77.       Hong Kong's fiscal reserves serve two main functions.  First, they help cope with fiscal pressure arising from economic downturns, unforeseen events or structural changes in the community.  Second, they assist the Exchange Fund in maintaining the stability of Hong Kong's monetary and financial systems.  I do not consider that the reserves need to keep expanding, but rather they should be maintained at an appropriate level with a view to providing adequate resources to meet our needs.


78.       At the end of last year, the International Monetary Fund (IMF) analysed Hong Kong's financial position.  While recognising that Hong Kong's economy had benefited from our skilful macroeconomic management, the underlying flexibility of our markets and our sophisticated financial market infrastructure, the IMF remains concerned that our narrow tax base, revenue volatility and ageing population will bring pressure to bear on government expenditure over the medium term.  The IMF is of the view that, in the absence of any policy change or reform, the levels of reserves needed to anticipate fluctuations in revenue could be around 30 to 50 per cent of GDP, while those aimed at anticipating fiscal pressures arising from population ageing could mean putting in an additional 30 per cent of GDP by 2030.  I think the IMF's suggestions can be used as a frame of reference.  Since our fiscal reserves are of crucial importance in maintaining a healthy public finance system, the Government needs to listen to more views from the community in this regard before coming to a decision.


 Content | Next


2006 | Important notices

Last revision date : 28 February, 2007