Income of the Fiscal Reserves
The investment income of the fiscal reserves is
another important source of revenue for the
Government, yet it is extremely volatile.
It has represented between 0.5 per cent and
18 per cent of government revenue over the past
we have noted calls from the community for higher
returns from the fiscal reserves.
After careful consideration and with a view
to increasing the Government's investment income and
enhancing its stability, I have decided to revise
the income-sharing arrangement between the fiscal
reserves and the Exchange Fund, subject to the
principle that the Fund's ability to defend our
currency and stabilise our monetary and financial
systems should not be undermined.
Effective from 1 April, the return on the fiscal
reserves will be calculated on the basis of the
average rate of return of the Exchange Fund's
investment portfolio over the past six years.
Under the new arrangement, the rate of return on the
fiscal reserves for 2007 will be 7 per cent.
I will also include the guarantee of a minimum
return so as to ensure that the annual investment
return in any year will not be lower than the
average yield of three-year Exchange Fund Notes for
the previous year.