Rare Exchange Fund withdrawal to pay for Northern Metropolis, other big schemes
South China Morning Post
by Lam Ka-singFebruary 25, 2026
AI-Generated Deep Dive Summary
Hong Kong’s Financial Secretary Paul Chan has proposed a significant transfer of HK$150 billion from the Exchange Fund over the next two years to fund major infrastructure projects, including the Northern Metropolis development. This move marks the first time since 1984 that investment income from the Exchange Fund, Hong Kong’s main investment arm and de facto sovereign wealth fund, will be redirected to government coffers. The transfer is part of a broader effort to address the city’s growing infrastructure needs while leveraging its record-breaking budget surplus.
The proposal comes as Hong Kong experiences an unexpected consolidated surplus for the second consecutive year. Financial Secretary Chan announced that HK$127.83 billion will be transferred into government funds, with an 11.1% increase in revenue contributing to this surplus. This includes transferring HK$75 billion annually from the Exchange Fund’s Bond Fund surplus and investment income to the Capital Works Reserve Fund for the next two years. Such a transfer underscores the government’s commitment to addressing infrastructure gaps while managing its financial resources strategically.
The decision to tap into the Exchange Fund’s investment income is rare and significant, with the last such move occurring in 1984 to compensate for lost revenue from removing taxes on Hong Kong dollar deposits. Now, nearly four decades later, the funds will be allocated to key projects like the Northern Metropolis, reflecting the government’s focus on long-term infrastructure development. This approach is seen as a way to stimulate economic growth and align with broader regional development goals.
For readers interested in global financial strategies, this move highlights Hong Kong’s innovative approach to managing its finances during a period of rapid change. By redirecting substantial resources toward infrastructure, the city aims to position itself for sustained economic growth and regional competitiveness. The proposal also signals the government’s willingness to adapt its financial policies to meet pressing development
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Originally published on South China Morning Post on 2/25/2026