Eye has to be kept on Hong Kong’s purse strings
- With coronavirus relief measures costing more than HK$300 billion, the government must ensure there are adequate reserves for the months of challenges that may lie ahead
As the third wave of Covid-19 lingers, the Hong Kong government is compelled to give struggling businesses another shot in the arm. The dosage, however, is not as high as before, and understandably so. There is, after all, a limit to how much more can be drawn from the city’s dwindling coffers. That makes managing fiscal health as important as public health, especially when the two may well deteriorate during a prolonged epidemic.
Having spent more than HK$287 billion in the budget and two rounds of relief measures, the latest HK$24 billion package will further cut the city’s reserves to HK$800 billion, just enough for a year or so of government spending. With only HK$4.5 billion set aside for the jobless subsidy scheme and support for tourism, catering and other trades hit by health restrictions, a lukewarm response is to be expected.
Nine months into the worst pandemic in a century, citizens around the world rightly turn to the authorities for some relief. In Hong Kong, expectations are further built on years of largesse in the government’s annual budget. This is probably why no sooner had the HK$10,000 cash handout been put into the pockets of the people than there were calls for another HK$5,000 in next year’s budget. We trust the finance chief will get his priorities right.
The city is fortunate enough to have accumulated enviable reserves – previously HK$1.1 trillion – despite recurrent social investment programmes and populistic budgetary measures over the years. But if the epidemic continues unchecked, even the fattest coffers will be slimmed down in the long run. Reserves have now fallen by more than a quarter to the same level in 2003 following the severe acute respiratory syndrome (Sars) epidemic.
A drop in applications for the government’s second round of wage subsidies has fuelled speculation that more companies are opting for downsizing and lay-offs rather than financial aid. Thankfully, a gradual easing of health and social-distancing restrictions means economic activities are picking up again. Ensuring the epidemic is kept under control is the best way forward for the economy. Recent fluctuations and economic headwinds underline the importance of fiscal prudence.
