Hong Kong SAR – On February 26, 2025, Financial Secretary Paul Chan presented the 2025-26 Budget, highlighting strategies for fiscal consolidation while reinforcing the city’s competitive edge. Chan stressed the importance of managing expenditure growth, optimizing fiscal resources, and exploring new revenue sources.
For the fiscal year 2024/25, Hong Kong forecasts a consolidated deficit of $87.2 billion, largely due to the impact of pandemic-related counter-cyclical measures, as well as disruptions in trade, supply chains, and market sentiment due to geopolitical tensions. However, Chan anticipates that the Operating Account will return to surplus within two years.
The government aims to implement a “reinforced version” of fiscal consolidation, targeting a cumulative 7% reduction in government expenditure by 2027-28. Measures include a salary freeze for all public officials, including the Chief Executive and civil servants, for the 2025-26 fiscal year. Additionally, the civil service establishment will be cut by 2% in 2026-27 and 2027-28, leading to a reduction of approximately 10,000 posts over two years.
Chan emphasized the government’s commitment to delivering more efficient public services through technology and digital transformation.
To generate revenue, the Budget proposes adjusting various government fees and charges, including increasing the air passenger departure tax from $120 to $200 per passenger starting in October 2025. Adjustments will also be made to road user charges and public transport fare subsidy schemes, with expected savings of $6.2 billion over the next five years.
Moreover, to support infrastructure development, particularly the Northern Metropolis project, the government will issue bonds under the Government Sustainable Bond Programme and the Infrastructure Bond Programme. Over the next five years (2025-26 to 2029-30), Hong Kong plans to issue between $150 billion and $195 billion worth of bonds annually. These funds will be earmarked exclusively for infrastructure investments, not recurrent expenditure.
Despite the increase in debt issuance, the government ensures that Hong Kong’s debt-to-GDP ratio will remain prudent and manageable, ranging from 12% to 16.5%, significantly lower than most advanced economies.
This Budget underscores Hong Kong’s commitment to fiscal responsibility while securing the resources necessary to maintain its competitive and economic resilience.
