Du Yaoming Commentary] Structural contradictions besiege the fiscal crisis, leaving no escape

 

Despite the SAR government's deficits year after year, Beijing officials said the problem was not serious because Hong Kong's economy had resumed growth and its growth rate was catching up with that of developed economies around the world. However, when economic growth was unable to eliminate the fiscal deficit and instead continued to grow, Hong Kong not only faced the difficulty of running out of money, but also fell into a deepening structural crisis.

According to this year's budget, Hong Kong's economic growth is projected to be between 2% and 3% annually between 25/26 and 29/30. However, the cumulative fiscal deficit over the past five years is estimated to be HK$952.8 billion, of which approximately HK$500 billion will be used to repay government debt. Excluding the approximately HK$320 billion in bonds issued over the past six years, the government plans to issue another HK$885 billion in bonds over the next five years, far exceeding its current fiscal reserves of HK$580.3 billion. Therefore, after 29/30, the SAR government will undoubtedly need to continue issuing bonds to cover its debt burden if it wants to avoid default.