The Hong Kong Special Administrative Region’s consolidated budget deficit will drop to less than HK$100 billion ($12.86 billion) for the fiscal year 2024-25 after including proceeds from bond issuance, Financial Secretary Paul Chan Mo-po said.

Writing in his Sunday blog, Chan said the SAR government will review its expenditure structure following the launch of public consultations for the 2025-26 budget on Dec 15.

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The city recorded budget deficits of HK$122.3 billion in 2022-23 and HK$100.2 billion in 2023-24 as a result of hefty pandemic-related expenditures, while high interest rates and geopolitical tensions dampened capital flows and local asset markets, hurting revenue streams, he said.

To plug the finance gap, Chan announced in his 2023-24 Budget speech that the government would issue HK$120 billion worth of bonds in the 2024–25 financial year, of which HK$70 billion would be retail bonds.

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The finance chief will deliver the 2025-26 Budget speech on Feb 26.

“The key to improving public finances lies in increasing revenue and reducing expenditure, with the government’s strategy focused on the latter,” he said, adding that the priority is to control the growth of recurrent expenditure while maintaining and improving public services.“Resources will be prioritized for the Northern Metropolis and other projects related to economic and housing development,” Chan said.

Hong Kong will tap debt markets and public-private partnerships to fund infrastructure development to “create space for new economic drivers to accelerate growth and generate tax and other revenues”.

The city introduced a fiscal consolidation program in last year’s budget requiring a 1-percent annual cut in recurrent expenditure through fiscal 2024-27.

Chan said the government is now considering stronger measures. “Given current economic and fiscal conditions, we are considering intensifying fiscal consolidation efforts.”

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Speaking on a Radio Television Hong Kong program on Saturday, Chan said he hopes to restore fiscal balance within about three years.

He noted while the city saw steady progress in the first three quarters of last year, the pace of growth fell short of expectations.

To boost growth, the international financial hub will focus on exploring new markets while reinforcing its traditional economic strengths and fostering new growth engines, he added.

Contact the writer at tianyuanzhang@achinadailyhk.com