Budget to maintain Hong Kong’s competitiveness amid fiscal consolidation

HONG
KONG
SAR
–

Media
OutReach
Newswire
–
27
February
2025
–
Hong
Kong
SAR’s
Financial
Secretary
Paul
Chan
delivered
his
2025-26
Budget
yesterday
(February
26),
with
clear
path
and
initiatives
to
rein
in
the
deficit,
while
accelerating
the
city’s
development
and
maintaining
its
competitive
edge
of
a
low
and
simple
tax
regime.

“The
key
is
managing
expenditure
growth,
making
good
use
of
the
Government’s
fiscal
resources,
and
identifying
new
revenue
resources,”
Mr
Chan
said.

He
forecast
a
consolidated
deficit
of
$87.2
billion
for
2024/25
with
the
Operating
Account
returning
to
surplus
within
two
years.

The
deficit,
Mr
Chan
said,
was
largely
due
to
the
impact
of
counter-cyclical
measures
launched
in
response
to
the
COVID-19
pandemic
as
well
as
challenges
such
as
the
geopolitical
landscape
and
related
disruptions
to
trade,
supply
chain,
cash
flow
and
sentiment
in
the
investment
market.

Under
a
proposed
“reinforced
version”
of
the
fiscal
consolidation
programme,
Mr
Chan
announced
a
range
of
measures,
including
a
cumulative
reduction
of
7%
in
government
expenditure
by
2027-28,
compared
to
the
level
in
2024-25.

The
Government
has
also
put
forward
that
the
executive
authorities,
the
legislature,
the
judiciary
and
members
of
the
District
Councils
take
a
pay
freeze
for
2025-26.
That
includes,
among
others,
the
Chief
Executive
and
all
politically
appointed
officials,
and
all
civil
servants.

The
civil
service
establishment
will
be
reduced
by
2%
each
in
2026-27
and
2027-28,
with
about
10,000
posts
expected
to
be
deleted
within
the
next
two
years.

“The
Government
has
all
along
endeavoured
to
deliver
more
efficient
public
services
to
citizens
through
leveraging
technology,
streamlining
processes
and
driving
the
digital
transformation
of
public
services,”
Mr
Chan
said.

Meanwhile,
the
conditions
of
the
two
public
transport
fare
subsidy
schemes
will
be
adjusted,
with
expected
saving
of
$6.2
billion
in
the
next
five
years.

Alongside
controls
on
government
expenditure,
the
Financial
Secretary
proposed
a
raft
of
measures
to
boost
revenue,
notably
by
adjusting
some
government
fees
and
charges
under
the
“user
pays”
and
“affordable
users
pay”
principle.

These
include,
for
example,
reviewing
government
fees
and
charges
for
road
users
in
relation
to
some
tunnel
tolls,
trunk
roads,
licences
and
parking
charges,
and
increasing
the
rate
of
air
passenger
departure
tax
from
$120
to
$200
per
passenger
starting
from
October
2025.

The
Financial
Secretary
noted
that
issuing
bonds
to
support
infrastructure
development
is
a
common
practice
worldwide.

To
take
forward
major
infrastructure
projects,
particularly
the
Northern
Metropolis
development,
Mr
Chan
said
“Hong
Kong
has
the
prerequisite
and
capability
to
suitably
increase
bond
issuance,
thereby
effectively
utilising
market
resources.”

“With
the
increase
in
capital
works
expenditure,
I
will
expand
the
scale
of
bond
issuance
accordingly.
It
is
expected
that
during
the
five-year
period
from
2025-26
to
2029-30,
a
total
of
about
$150
billion
to
$195
billion
worth
of
bonds
will
be
issued
under
the
Government
Sustainable
Bond
Programme
and
the
Infrastructure
Bond
Programme
every
year.”
He
remarked
that
bonds
will
not
be
issued
to
fund
government
recurrent
expenditure;
instead,
they
will
be
used
to
invest
in
infrastructure
only.

The
ratio
of
Hong
Kong
SAR
Government
debt
to
GDP
will
stay
at
12
to
16.5
per
cent,
which
is
a
prudent
and
manageable
level,
and
is
much
lower
than
most
of
the
advanced
economies,
Mr
Chan
emphasised.

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