Editorial : Bond Issuance Not a Shortfall Cover

【明報專訊】In their first budget of the post-pandemic era, the authorities have proposed using financial instruments such as issuing bonds to "better manage cash flow". This marks an important change in their financial management mindset, as it implies that bond issuance will become a concurrent keystone of the SAR's financial structure. If the authorities can maintain strong fiscal reserves, issuing bonds improves the government's cash flow and helps it in drawing up more long-term development plans. Still, filling deficits customarily by issuing bonds will be unwholesome.

As Hong Kong emerges from the adversity of the pandemic, its economy needs consolidation, and its people need recuperation. Everyone is surely most concerned about what kind of measures will be in the budget to relieve people's hardships and boost the economy. Recently, government officials repeatedly stated that the government has accumulated a huge fiscal deficit over the past three years and its fiscal reserves have declined. Its fiscal policy will shift from "relatively loose" to "moderately loose"; inevitably, it will have to explore new sources of revenue and cut spending, they said. Judging from the content of the new budget, the so-called "moderately loose" fiscal policy basically means scaling down sweetener handouts but sticking to a deficit budget. This is to maintain a certain level of relief and avoid seriously affecting people's livelihoods and economic recovery.

Financial Secretary Paul Chan said that more than 80% of the resources involved in the measures of this budget will be spent on citizens and small and medium enterprises. However, the public often feels it differently. For many, the likes of a salaries tax reduction of $6000 at most and a rates concession for two quarters are a drop in the bucket.

In terms of planning for the future, the new budget proposed that the city should actively align with national development strategies, promote exchanges in the Greater Bay Area, step up efforts to establish Hong Kong as a green technology and financial centre and so on. However, there are few specific details. As for innovation and technology development, the highlights are more vivid. The government will set aside $3 billion to promote fundamental research in cutting-edge technology fields such as artificial intelligence and quantum technology. This will include setting up an Artificial Intelligence Supercomputing Centre and a Microelectronics Research and Development Institute. If implemented well, the plans will help Hong Kong become an international innovation and technology centre and promote the industrial diversity of its economy.

One of the impressions the new budget gives is that the authorities are looking everywhere for cash to improve the short-term fiscal situation. One of their measures is charging the Jockey Club an additional betting duty of $2.4 billion per year. The government also mentioned bond issuance. As the budget has proposed, starting from the new financial year, it will issue green bonds and infrastructure bonds of $65 billion in total annually for the next five years.

The SAR government always has a low debt level. Its outstanding debts are only equal to 4% of GDP, far lower than most of the other advanced economies. It is not a problem issuing bonds suitably to help start major infrastructure projects earlier. The key is, the authorities must avoid being spendthrift and ignore cost-effectiveness as they become comfortably off.

With an ageing population in Hong Kong, medical and social welfare expenditures will only rise in the long run, and the government's financial burden will become increasingly heavy. It is time to put public finances and tax structure reforms on the agenda. However, this topic is glossed over in the budget, which only says that we must first clearly consider the policy objectives of new taxes and let society have a full discussion first. The reforms of the tax structure affect all sides of society. A lengthy discussion is of course necessary. For this reason, the related discussions should start as soon as possible.









■/ Glossary 生字 /

recuperation : the act or process of getting back your health, strength or energy after being ill, tired, injured, etc.

comfortably off : having enough money to buy what you want without worrying too much about the cost

gloss over (sth) : to avoid talking about sth unpleasant or embarrassing by not dealing with it in detail

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