Deficit soars but enough in reserve, FS says
Financial Secretary Paul Chan says he expects the SAR's fiscal deficit to hit a worse-than-expected HK$139.8 billion for the financial year that's about to close, though he says the government's reserves remain strong.  In his budget speech, Chan said the government had missed revenue targets for profits tax, land premiums and stamp duty, citing the sluggish stock and property markets. Meanwhile the cost of anti-epidemic work and relief packages had increased government spending to HK$809.6 billion for 2022/23, some 16.8 percent higher than last year. Chan had originally predicted a deficit of about HK$56 billion for this financial year. The revised figure will be the second biggest deficit ever recorded by the SAR, lower only than the HK$232.5 billion in 2020/21.  The government will be left with a fiscal reserve of about HK$820 billion. Chan said the reserves remained at a prudent level and urged the public to base its assessment of the government's financial position over an economic cycle rather than an individual year.  "We need to launch counter-cyclical measures during economic downturns to stabilise the economy and safeguard people's livelihoods, to relieve the pressure on them," Chan said. "With an increase in expenditure and a decrease in revenue, the government will record a fiscal deficit. In times of an economic upturn, government revenue from tax and other sources, on the contrary, will increase, while the need to increase expenditure will also be less imminent." Simon Lee, a senior lecturer at the School of Accountancy at the Chinese University, said there's a need for the SAR to come up with new revenue sources. "Our collection from stamp duty and from land sales dropped quite significantly... A quite substantial amount of our revenue relies on stamp duty and land sales. So, the government should formulate some medium- to long-term solutions to revenue sources. This has not been done in so many years," he said. The financial secretary, meanwhile, said the government would issue green and infrastructure bonds to the tune of HK$65 billion. Chan proposed the setting up of an Infrastructure Bond Scheme to better manage the cash-flow needs of major infrastructure projects and facilitate the early completion of projects. And the government will expand its existing green bond scheme to cover sustainable finance projects. Details will be announced by the Hong Kong Monetary Authority later. But the financial secretary said the administration would try to keep its debt-to-GDP ratio at a low level, and that proceeds from bond issuance won't be spent on recurrent expenditure. For the 2023/24 financial year, Chan expects the government to face another deficit of more than HK$54 billion, though he anticipates a return to surpluses in the subsequent four years.  He expects the reserves to fall to HK$762.9 billion, equivalent to 12 months of government expenditure, by 2024. It's then predicted to increase to HK$983.7 billion by the end of March 2028, equivalent to approximately 14 months of government expenditure._____________________________
Last updated: 2023-02-22 HKT 18:06 