Hong Kong's Strategic Budget Focuses on Fiscal Consolidation and Growth

Hong Kong's Financial Secretary, Paul Chan, unveiled the 2025-26 Budget, emphasizing deficit control and economic growth. The Budget outlines measures to manage expenditure and enhance revenue, aiming to maintain Hong Kong's low tax advantage. Chan projected a $87.2 billion consolidated deficit for 2024/25, largely due to pandemic-related measures. He proposed a 7% reduction in government spending by 2027-28 and a pay freeze for government officials for 2025-26.

The civil service will see a 2% reduction in 2026-27 and 2027-28, translating to around 10,000 job cuts. Public transport fare subsidies will also be revised, saving $6.2 billion over five years. Revenue-enhancing strategies include adjusting government fees, especially affecting road users and air passengers, with departure taxes rising from $120 to $200 by October 2025.

The Budget also plans increased bond issuance for infrastructure projects like the Northern Metropolis development. Bonds, not funding recurrent expenditure, are set to reach $150-$195 billion annually from 2025-30. Chan assured that government debt remains a prudent 12-16.5% of GDP, lower than in most advanced economies.