Hong Kong faces hard choices on spending to fix its budget deficit

The recently published Hong Kong government accounts show that, after eight months of the current financial year, the Treasury’s expenditure was HK$471.6 billion (US$60.6 billion), with HK$248.2 billion in revenue. That means our public finances incurred a deficit of HK$223.4 billion. After taking into account net cash of HK$80.2 billion received from new bond sales, less partial redemption of existing ones, the adjusted cash flow was minus HK$143.2 billion.

In his speech introducing the 2024 budget, Financial Secretary Paul Chan Mo-po forecast a deficit of about HK$48.1 billion. However, Chan’s figures included cash from bond sales, which muddies the issue. Bonds are not revenue but debts the government must repay. The true deficit – that is, revenue less expenditure – would actually exceed HK$168 billion, so when Chan indicated the deficit would more than double to about HK$100 billion, that suggests a real deficit of more than HK$200 billion.