In response to the budget deficit of HK$87.2 billion ($11.2 billion), the Hong Kong Special Administrative Region government has introduced cost-cutting measures, such as adjustments to the HK$2 transport subsidy, freezing civil service salaries, and reducing subsidies. While these proposals potentially will generate billions of dollars of savings, they still amount to a drop in the ocean compared to the scale of the deficit. There are also promising revenue ideas, including the legalization of basketball betting and the global minimum tax of 15 percent for large corporations, which are expected to bring in as much as HK$17 billion. However, these initiatives will take a couple of years at least before revenue starts flowing. So, what can be done to achieve a short-term “quick win”? To tackle this fiscal challenge, Hong Kong must think outside the box and make some difficult decisions.
Lesson from the US
Looking around the world, almost every major economy is grappling with budget deficits. The United States, for example, leads the list with a deficit of $1.9 trillion, or 7.07 percent of its GDP in 2025. The Congressional Budget Office projects a staggering $952 billion in interest payments in fiscal year 2025 alone. In response, the US has taken drastic steps, including the establishment of the Department of Government Efficiency under the leadership of billionaire Elon Musk, who has set an extremely ambitious goal of cutting $4 billion per day until September. US President Donald Trump is also aiming for the first balanced budget since the Clinton administration by as early as 2026.
While these measures, such as sharp cuts in foreign aid and downsizing the federal workforce, have sparked protests and legal challenges, they underscore a critical lesson: A willingness to set ambitious goals and make difficult decisions can mobilize change. Hong Kong may not need to adopt such radical measures, but the US example highlights the importance of strong leadership and accountability in confronting fiscal challenges.
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Unlock potential of ‘big money’
To address a deficit of this scale, the HKSAR government must tap into resources with the capacity to make a significant impact. An underutilized area is the HK$1.8 trillion pooled across 42 government funds, alongside the HK$3.8 trillion Exchange Fund, managed by the Hong Kong Monetary Authority. These funds, established during times of surplus, were designed to ensure financial stability and provide a buffer against unforeseen challenges.
In boom years, these funds were considered the “icing on the cake” of Hong Kong’s financial planning. However, in today’s deficit-driven environment, their effective management could reshape the city’s fiscal landscape. In the current budget, the government plans to consolidate six unspent funds totaling HK$62 billion into its accounts by 2025-26 and transfer the HK$15 billion remaining from the Anti-epidemic Fund, allowing greater flexibility in the use of public financial resources.
While some critics may dismiss these moves as “creative accounting”, the more-pressing issue is the tens of billions of dollars sitting idle, failing to deliver tangible benefits to the community. The public perception is clear: The government is managing trillions of dollars but struggling to generate reasonable returns for public spending. The Exchange Fund, with its compounded annual return of 4.5 percent since 1994, could serve as a benchmark for what constitutes a “reasonable” return.
In the short term, the government should explore strategies to maximize returns on these funds. Over the medium to long term, these resources should be directed toward investments that enhance Hong Kong’s development and competitiveness, ensuring that they contribute to the city’s economic transformation and long-term prosperity.
Embrace technology for efficiency
Beyond leveraging government funds, Hong Kong must explore opportunities to reduce expenditures through technology. For example, traffic enforcement remains a labor-intensive process. Instead of relying on police officers and traffic wardens to issue fixed-penalty tickets, the government could implement real-time traffic-monitoring systems. These technologies would not only improve enforcement efficiency but also free up personnel for other essential public services after retraining and upskilling. While initial capital investment and legal considerations may pose challenges, the long-term benefits — including cost savings, improved resource allocation, and enhanced service delivery — would far outweigh the upfront costs.
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Think like a CFO
If the financial secretary were the chief financial officer of a major corporation, the approach to managing the budget would be more aggressive and results-driven to meet shareholder expectations. Civil servants, like corporate employees, would need to embrace change, adapt to new challenges, and contribute to the organization’s transformation.
Hong Kong’s financial deficit, while daunting, may be a blessing in disguise. It forces every level of the government to rethink its fiscal strategies, embrace innovation, and prioritize reforms with a common goal to achieve a balanced budget. By leveraging “big money”, adopting technology to improve efficiency, and aligning spending with strategic goals, Hong Kong has the potential to turn its fiscal challenges into opportunities for renewal.
The author is a senior lecturer, the Hang Seng University of Hong Kong, and co-chair of the Advocacy and Policy Research Committee, the Hong Kong Institute of Human Resources Management.
The views do not necessarily reflect those of China Daily.
