Financial Secretary Paul Chan Mo-pounveiled the government budget for the 2023-24 fiscal year on Wednesday, which was hailed by Chief Executive John Lee Ka-chiu as the manifestation of the governance philosophy and policy direction of his administration.

The budget is all-encompassing, with two eminent features that caught my attention.

First, the government has strived to strike a balance between proactive fiscalpolicy and pragmatic fiscal management.

Chan forecast a deficit of HK$139.8 billion ($17.8 billion) for the 2022-23 fiscal year to March, after taking into account HK$66 billion in revenue from bond issuances. This is HK$83.5 billion more than the original deficit estimate of HK$56.3 billion.All in all, the government’s fiscal reserves will fall from HK$1.1 trillion before the outbreak of the COVID-19 pandemic to HK$817.3 billion by the end of March.

The government initially forecast a surplus of HK$42.9 billion for the 2023-24 fiscal year. Chan, however, revised the figure in his new budget, predicting a deficit of HK$54.4 billion for 2023-24 after taking into account the expected proceeds from issuance of government bonds of about HK$65 billion.

In view of the grim public finance outlook, the financial chief had to be more conservative in planning government expenditure, with notably far fewer perks and handouts for residents in the new budget compared with those in the previous fiscal year. The much-anticipated electronic consumption voucher was cut by half to HK$5,000 this year, slashing the total expenditure on this item from HK$60 billion to HK$30 billion. The cap for the salaries tax rebate was also reduced from HK$10,000 to HK$6,000. Meanwhile, reductions in rates and the electricity subsidy have also been curtailed.

Hong Kong’s public finance is characterized by its simple tax types, low tax rates and a narrow tax base. While simple tax types and low tax rates are instrumental in encouraging investment and consumption, the combined effect with a narrow tax base easily results in fiscal deficits during economic downturns. Thus, the question of how to expand fiscal revenue has always weighed on the minds of successive governments of the Hong Kong Special Administrative Region. Although this matter has been on the government’s policy agenda, introducing new taxes has been met with resistance and obstacles.

Hong Kong has just emerged from the gloom of the 3-year pandemic, yet the negative effects of the ensuing economic downturn, reflected in last year’s GDP contraction, still loom large. It is simply not the right moment to introduce new taxes. Therefore, the budget seeks to increase fiscal revenue by an annual amount of HK$65 billion by issuing government bonds over the next few years. Meanwhile, tobacco taxwas raised substantially by HK$12 per pack of cigarettes. Starting from the 2023-24 fiscal year, an annual football betting duty of HK$2.4 billion will be levied on the Hong Kong Jockey Club for the next 5years.

Public finance of the HKSAR government not only manages fiscal revenue and expenditure but also executes fiscal policies to promote socioeconomic development. The administration under John Lee has spared no effort in helping Hong Kong shake off its pandemic woes, enabling it to show the new face of the city to the international community. That is the second feature of the budget that is noteworthy.

Since the second half of 2022, Hong Kong has gradually gotten rid of the pandemic spasm. The HKSAR government launched a citywide cleanup campaign in August last year in preparation for welcoming visitors from all over the world. This was followed by the Hello Hong Kong campaign and the overseas trips of principal officials led by John Lee to promote Hong Kong. And the Happy Hong Kong campaign unveiled in the new budget is the latest addition to the government’s promotion drive.

The Happy Hong Kong campaign will focus on activities related to gourmet experiences, fun amusements, exciting ambience and cultural creations. It will complement the Hello Hong Kong campaign to synergize the city’s economic recovery. The HKSAR government will hold large-scale food fairs in various locations across the city. In support of the Happy Hong Kong campaign, organizations like the West Kowloon Cultural District, Hong Kong Disneyland, Ocean Park, Cyberport’smanagement and Hong Kong Science and Technology Parks Corp will each hold themed fairs, carnivals or other activities this year.

To enhance Hong Kong’s international image, the HKSAR government has earmarked HK$100 million in the budget to attract more mega events with significant visitor appeal, boosting tourism, to be staged in Hong Kong.

In addition, the Hong Kong Tourism Board will spend over HK$250 million to help promote tourism events, including the Hong Kong Pop Culture Festival to be held for the first time in April. Another highlight is the organization of a mega sea-land carnival with Victoria Harbour as the stage, which is expected to attract performing groups from around the world to take part in dancing, music and street performances.

The budget also allocated HK$200 million for further efforts in securing more international meetings, conventions and exhibitions in relation to finance, innovation and technology, medicine, etc, to attract more high value-added visitors.

Hong Kong will also work on expanding its international cruise business. Having reached out to key global cruise companies, the HKSAR government will provide greater incentives to attract international cruises to visit. This year, cruises from 17 companies covering 85 routes are expected to berth in Hong Kong. The HKSAR government and the Hong Kong Tourism Board will offer cruise ship visitors consumption vouchers under the Hong Kong Goodies campaign, with a view to add new businesses to the city’s world-renowned tourism industry.

From the cleanup campaign to Hello Hong Kong and Happy Hong Kong, the HKSAR government is trying every means possible to rebrand the city’s image following the end of the pandemic. It is hoped that Hong Kong’s economic recovery will pick up steam, to be followed by economic transformation and industrial upgrading that will accelerate its integration into national development.

The author is a senior research fellow of China Everbright Holdings.

The views do not necessarily reflect those of China Daily.