Lock up Hong Kong future fund for at least 10 years, government advisers say
Working group calls for money to be locked up for at least 10 years and for spending to be allowed only for 'absolutely essential' items
The "future fund" should be locked up as an investment for at least 10 years and withdrawn only when the fiscal reserves drop to a level equivalent to six months of gross government expenditure, according to details unveiled by government advisers.
Even if the money was withdrawn, it should be used only for "absolutely essential" expenditure items, the working group on long-term fiscal planning said in its second report submitted to Financial Secretary John Tsang Chun-wah, which was released to the public yesterday.
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"Whether these items are technically classified as capital, recurrent or one-off might not be material - provided they are all badly needed," the report said, adding that debt financing and securitisation of government assets should be exhausted before any withdrawal was made.
The fund will be set up this year to cope with structural deficits likely to emerge within a decade amid an ageing population and a shrinking workforce.
It will consist of HK$220 billion from the existing land fund and a quarter to one-third of future government budget surpluses. Tsang announced in his budget that the fund would be managed by the Hong Kong Monetary Authority.
The withdrawal criterion of six months of gross government expenditure is based on a general observation that the government usually faces a cash flow shortfall of three to four months during a single year. The advisers then added a buffer of two months of expenditure to cope with any additional welfare expenditure needed during an economic downturn.
