Concerns Arise Over Hong Kong’s Increasing Reliance on Bonds

In a recent announcement on the social media platform Facebook, John Tsang Chun-wah, the former financial secretary, conveyed his apprehension regarding the escalating financial difficulties confronting the Hong Kong government. Tsang expressed his concerns over the possible enduring effects of the current financial predicament, particularly in light of the government’s plans to issue a substantial number of bonds in the upcoming fiscal year.

The current Financial Secretary, Paul Chan Mo-po, disclosed the government’s proposal to issue multiple bonds, with a substantial proportion earmarked for the retail tranche. Tsang underscored his unease about Hong Kong’s increasing dependence on loans and accruing debt, highlighting the potential imposition of a formidable burden on future generations as the financial situation deteriorates.

Whilst recognizing that governments typically issue bonds to support their daily operations, Tsang cautioned against disregarding the ramifications of Hong Kong’s unique status as a special administrative region, which lacks the same flexibility as countries with the authority to print their own banknotes. He emphasized the unsustainable nature of an economy reliant on loans to meet its regular expenses, particularly if bonds are regularly issued to fund daily operations, potentially leading to a depletion of Hong Kong’s financial resources.

In consideration of the challenges presented by the structural deficit, Tsang underscored the significance of investigating new revenue streams and curtailing expenditure to effectively address the issue. He drew attention to the limitations of conventional approaches, such as tax hikes and public service charges, citing their incapacity to generate substantial revenue in light of the anticipated deficit for the upcoming fiscal year.

Tsang scrutinized the measures proposed in the recent budget, observing that while they may yield some revenue, their impact would be insufficient in light of a deficit surpassing HK$100 billion. He also raised queries about the government’s adherence to the principle of maintaining expenditure within the confines of revenues, as stipulated by Basic Law Article 107, in view of the persistence of structural deficits.

Overall, Tsang’s statements underline the pressing need for the Hong Kong government to confront the challenges posed by the growing reliance on bonds and the associated structural deficit. His insights convey a profound concern about the long-term financial viability of the region and the potential repercussions for future generations.

Reference: Singtaonewscorp.com