Tackling a ballooning deficit has become the overriding priority for Financial Secretary Paul Chan Mo-po. However, there is more to public finance than just balancing the books. From curbing public expenditure and boosting revenues to making bold economic reforms and fostering advancement within the national development framework, Chan is facing his toughest challenge yet when he unveils the government budget on Wednesday.
The challenge has been put into perspective in a series of analyses and explainers by the Post recently. The veteran finance chief is essentially walking a tightrope of tightening the belt without upsetting public services and subsidies, while trying to restore fiscal balance and nurture sustainable growth and development that complements the national strategy.
With the budget deficit likely to exceed HK$100 billion again for the third financial year, the usual clamour for handouts and sweeteners have been drowned out by worries about benefits and spending cuts. While some tough decisions are to be expected, the negative impact should be kept to a minimum. For instance, instead of an across-the-board pay cut for the civil service, to better enhance government efficiency and budget saving, there should be a serious review to streamline the overall government structure given the latest technological development and the proliferation of artificial intelligence (AI) applications.
Keeping expenditures within the limits of revenues is a constitutional duty enshrined in Basic Law Article 107. Chan has argued that analyses of fiscal position should be based on an economic cycle rather than short-term performance. True as that is, concerns are growing over whether the city is locked in to what appears to be a structural deficit, with public spending continuing to outstrip income as the sluggish property market continues to dampen land sales and stamp duty revenues.
China’s shift from a manufacturing powerhouse to an engine of “new quality productive forces” has produced opportunities and challenges. The economic headwinds fuelled by intensifying geopolitical tensions have added to the uncertainty. It is incumbent on Hong Kong to ride on the transformation and explore new growth and development that benefits both the city and the country.
The recent calls by Xia Baolong, Beijing’s point man on Hong Kong affairs, to be “bold in reform, dare to break new ground and innovate continuously”, have set a clear direction. The finance chief should seek breakthroughs with some bold steps, not just for restoring fiscal health, but also for long-term development. It is incumbent on the administration to look beyond the remaining 28 months in the current term and tackle some deep-seated problems that have been holding back the city’s advancement.
