Beware day of reckoning, Tsang warns; Financial Secretary John Tsang Chun-wah has given another stark warning on Hong Kong’s economy

January 22, 2014 Leave a comment

Beware day of reckoning, Tsang warns
Imogene Wong
Monday, January 20, 2014

Financial Secretary John Tsang Chun-wah has given another stark warning on Hong Kong’s economy. If expenditure growth continually surpassed increases in income, Hong Kong would be in deficit and eventually its fiscal reserves would be depleted.The process will start, he said, the day the government’s budget turns from surplus to deficit.

“[Our] reserves will not be exhausted in the current government’s term,” he wrote in his latest blog entry posted yesterday.

“But that does not mean such a day is far off.

Tsang was responding to public concerns about the government’s increasing financial burden, especially rising expenditure on social welfare proposed in the policy address on Wednesday.

He also said it was reasonable to worry about the recurrent expenditure growing too fast, as that would have a “snowball effect” and government efforts to streamline spending may prove futile.

Hong Kong then would need to hike taxes or borrow money as fiscal reserves would be exhausted. “I will try my very best to ensure there is a surplus in the rest of my term so as to keep reserves up and hence leave more time to tackle structural problems,” he said.

Last week, Tsang estimated the welfare package as proposed in the policy address would raise recurrent expenditure by HK$20 billion, compared to a total of HK$291.3 billion in the 2013/14 budget. But Chief Secretary Carrie Lam Cheng Yuet-ngor predicted an increase of HK$10 billion only.

Secretary for Financial Services and the Treasury Ceajer Chan Ka-keung said the difference was due to separate calculation methods.

This prompted speculation that Tsang opposed chief executive Leung Chun-ying’s anti-poverty measures. Both denied the claims.

Filed under Macro Trends

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