Exclusive | Coronavirus: Hong Kong finance chief rules out issuing bonds to pay for pandemic deficit
- The city is bracing for a massive funding shortfall as the health crisis wreaks havoc on the economy
- But Paul Chan says the government will not sell debt to cover expenditures although bonds might be issued for infrastructure projects
Speaking to the Post, Financial Secretary Paul Chan Mo-po said the city would adhere to strict fiscal discipline, as required by the law, despite the expectation of a “very significant deficit” in the upcoming financial year.
The funding gap could exceed HK$276.6 billion (US$35.68 billion), nearly 10 per cent of Hong Kong’s gross domestic product, Chan warned. But selling debt was not the solution.
“At this juncture, we have no plans to issue bonds to finance the deficit occasionally caused by the anti-epidemic initiatives,” he said. “The market may misinterpret that the government is loosening our financial discipline in order to fund the deficit.”
Chan pointed to Article 107 of the Basic Law, the city’s mini-constitution, which requires the government strive for fiscal balance. Issuing bonds to cover a deficit “is not sustainable in terms of fiscal philosophy, because you are using future capital for current uses”, he said.

“But if we are issuing bonds for future investments, the interpretation would be different, and society will be more accepting.”
But given the sizeable expenditure expected, the government would consider issuing bonds for “worthwhile” ones, including the development of railways and near-shore reclamation work. Chan pointed to the extensions of the Tung Chung line, the West Rail line to Tuen Mun South and the Northern Link as possibly deserving bond financing. The budget gave the Mass Railway Corporation the go-ahead to begin detailed planning for the expansions.

Chan expected smaller reclamation works carried out near the shore might instead be candidates for such financing.
The finance chief also addressed the economic situation in the United States, where the Federal Reserve’s assets have grown by US$1.92 trillion since February to reach US$6.08 trillion, by printing money and buying bonds from banks. Chan said the government was monitoring the situation.
“Economists and commentators have suggested that this is the only option the United States could choose at the moment, but we still have to evaluate the long-term consequences, whether it will create another asset bubble, and how big it could be,” he said.
Despite the massive relief packages rolled out over the past two months to cushion the economy from the blow of the pandemic, the minister offered reassurances the city still had plenty of money. Fiscal reserves stood at HK$800 billion to HK$900 billion, which he called “a pretty prudent level”.
Chan agreed that, to be financially sustainable, Hong Kong would need to consolidate expenditures and build new sources of revenue, including drawing investors in financial services, asset and welfare management, as well as setting up corporate treasury centres.
