Budget Speech by the Financial Secretary (12)

In the coming years, the Hong Kong government will progressively roll out projects related to the New Territories alongside other infrastructure works, aiming to enhance livelihoods. This will be supported by a significant increase in capital works expenditure, which is projected to rise from $90 billion to $120 billion per annum. The government intends to utilize various development models, including public-private partnerships and increased bond issuance, to ensure timely project implementation and early benefits.

The issuance of government bonds is a common practice globally to support infrastructure development. In response to the projected increase in capital works expenditure, Hong Kong plans to enhance bond issuance. From 2025-26 to 2029-30, the government aims to issue bonds worth $150 billion to $195 billion annually under the Government Sustainable Bond Programme and the Infrastructure Bond Programme. Approximately 56% of these bonds will be used to refinance short-term debts, and the borrowing ceiling is anticipated to increase from $500 billion to $700 billion.

The proceeds from bond issuance will be dedicated to infrastructure investments, rather than funding government recurrent expenditure. This fiscal discipline ensures that market capital is effectively utilized. The issuance of longer-term bonds will align cash flow with project requirements.

The Medium Range Forecast ("MRF") for the government's revenue and expenditure, along with financial position, reflects the reinforced fiscal consolidation measures. Real economic growth rates are projected to be 2% to 3% for 2025-26 and 2.9% per annum for the subsequent period until 2029-30. The average annual capital works expenditure is expected to be approximately $120 billion, with recurrent government expenditure growing at 3.5% per annum. The ratio of total government expenditure to GDP is projected to fall from 24.4% in 2025-26 to 20.9% in 2029-30. The ratio of government revenue to GDP is anticipated to maintain at around 20%, assuming conservative growth in land premium and tax revenues.

The MRF includes the proceeds from the issuance of government sustainable bonds and infrastructure bonds, amounting to approximately $150 billion to $195 billion annually. Based on these projections, deficits in the Operating and Capital Accounts will gradually reduce, and the Consolidated Account is expected to return to a surplus starting in 2028-29.

By the end of March 2030, fiscal reserves are estimated to amount to $579.1 billion, representing 13.9% of GDP. This reserve is equivalent to approximately eight months of government expenditure.

The Budget Speech underscores the progress of Hong Kong's economy and emphasizes the need for proactive fiscal management. It highlights the importance of leveraging technology to drive innovation and overcome development challenges. The choice of the budget cover color, lake blue, symbolizes a blue ocean of limitless potential and promising prospects for Hong Kong's future.