Inside Out | This budget week, let’s not squirrel our massive reserves away for another year

When Carrie Lam Cheng Yuet-ngor’s first budget is unveiled on Wednesday, it will be important for us all to savour what it feels like to be in a lucky place.

As Financial Secretary Paul Chan Mo-po sits on reserves estimated at HK$1.7 trillion (US$217.3 billion), and ponders over whether – or indeed how – to deploy a budget surplus around HK$160 billion, take note of last Friday’s sober front page lead headline in the Financial Times: “Rising tide of sovereign debt to hit rich nation budgets, warns OECD”.

The FT elaborates that the combined debt of the 35 OECD member economies have grown from US$25 trillion in 2008 to more than US$45 trillion at the end of last year, that average debt-to-GDP ratios have risen to 75 per cent, and that their fresh borrowing needs in the year ahead amount to US$10.5 trillion – or about HK$80 trillion in Hong Kong terms.

Some may want to thank former Financial Secretary John Tsang’s Scrooge-ish grip on the purse strings over his decade in office, saving each year for future rainy days through 10 of the rainiest years we have ever felt.

But many more would say that our stupendous accumulated surpluses arise more by accident than design – a combination of the chronic unpredictability of revenues from land sales, paranoid reluctance to subject ambitious spending plans to a filibusterous Legislative Council, and simple self-protective caution.

Either way, the reality is that we arrive at Wednesday’s budget facing a challenge that most finance ministers worldwide would die for. Economic growth is predicted to run close to 3.7 per cent in 2018. We have no net debt, and the government is flush with funds. Chief Executive Carrie Lam is predicting a budget “full of surprises”. Her legacy may rest on how cleverly she uses these accumulated windfalls. The danger is that she will squander them.