“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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