Hong Kong Financial Secretary Paul Chan pledges to spend wisely but does not rule out new round of consumption vouchers
- ‘Consumption voucher scheme boosts economy, but it is expensive,’ minister says
- He plans to be prudent and make sure city only spends when necessary to ensure sustainability
Hong Kong’s finance minister has pledged to keep the city’s expenditure within limits in light of economic challenges, but remained open to considering a new round of consumption vouchers.
The voucher scheme designed to boost the coronavirus-battered economy has cost the government HK$68.1 billion (US$8.7 billion) in total. Financial Secretary Paul Chan Mo-po said he would not rule out any proposals at this stage, but he acknowledged the scheme was expensive, adding he would consult opinions before he made a decision.
At a Legislative Council meeting on Monday, Chan said large deficits, the unfavourable economic environment and limited financial resources were challenges to economic recovery.
“We will allocate resources for work that has to be done and we will be prudent and ensure we live within our means, and spend when necessary to ensure sustainability. We must retain fiscal strength to cope with unforeseeable needs,” Chan said.
The minister also emphasised the need to actively seek new growth points to raise revenue and promote the sustainable recovery of the city’s economy.
Chan has previously projected a budget deficit exceeding HK$100 billion for Hong Kong’s current financial year, almost twice the HK$56.3 billion estimated in his budget speech in February.
The government’s financial reserves could also fall to about HK$800 billion, equivalent to 11 months of government spending.
But legislative council members have also urged Chan to introduce more financial relief measures, including announcing a new round of vouchers during his budget session next February.
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“People have expectations for consumption vouchers or other subsidies, but the government is in a tough fiscal position and wants to exercise prudence. How will the finance secretary balance the different expectations and priorities?” asked lawmaker Chan Kin-por, chairman of the council’s finance committee.
“Of course, the government cannot please everyone, so it needs to manage expectations.”
Lawmaker Elizabeth Quat also asked if a new round of vouchers would be issued next year to boost the economy.
In response, Chan agreed the government was in a tough fiscal position and would listen to views in a “humble manner”.
He highlighted previous studies that showed the vouchers worked in stimulating the economy, noting that people spent an extra HK$4,000 to HK$6,000 along with their vouchers.
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“Consumption vouchers have worked in boosting the economy … but they cost a lot of money,” Chan said.
“We are just starting the budget consultations, we will hear from various sectors of the community and monitor the economy before determining how to proceed.”
Some 6.3 million people, including new residents and arrivals from mainland China, are eligible for up to HK$10,000 under the consumption voucher scheme.
Authorities began handing out the second batch of HK$5,000 in August after the first round of the same amount was distributed in April. An instalment of HK$2,000 was handed out that month, followed by HK$3,000 in October.
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Hong Kong has downgraded its full-year economic forecast from between 0.5 per cent growth and 0.5 per cent contraction to a 3.2 per cent drop amid a recession, citing a deteriorating external environment and the Covid-19 pandemic.
The gross domestic product (GDP) fell by 4.5 per cent in the third quarter from a year earlier, following a 1.3 per cent decline in the previous three months.
The GDP for the first three quarters as a whole dropped by 3.3 per cent compared with the previous year.
