Hong Kong has ‘absolutely no problem’ with repaying rising debt under plan to issue more bonds to fund public projects, Paul Chan says

Chan had shared in Wednesday’s budget address plans to issue HK$120 billion in silver, green and infrastructure bonds for financial year 2024-25

Borrowing costs will decrease in future as interest rates are expected to fall soon, he adds

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Financial Secretary Paul Chan arrives for a media interview. The finance chief said the government was borrowing over the next few years to plug a shortfall in public finances that would only be closed in the 2027-28 financial year. Photo: Edmond So

Published: 4:32pm, 2 Mar 2024Updated: 6:00pm, 2 Mar 2024

The Hong Kong government has “absolutely no problem” with repaying rising debt under a plan to issue more bonds to fund the city’s public projects in coming years, Financial Secretary Paul Chan Mo-po has said, adding that borrowing costs will decrease in the future as interest rates are expected to fall soon.

Chan also said on Saturday that he had decided to reveal the delay to the Lantau Tomorrow artificial islands project to stop people from “hyping” its impact on the coffers, and assured that the private housing supply target for the next few years was on track to be met.

Chan announced in his budget address on Wednesday that the government planned to issue HK$120 billion (US$15.3 billion) in silver, green and infrastructure bonds for the 2024-25 financial year, with the figure ranging from HK$95 billion to HK$135 billion annually for the subsequent four years.

Construction work at a public housing site in Cheung Sha Wan. Photo: Xiaomei Chen

The finance minister told a radio programme the government was borrowing over the next few years to plug a shortfall in the public finances that would only be closed in the 2027-28 financial year, when revenue was expected to exceed spending again.

He conceded part of the future borrowings would be spent on repayments of previously issued bonds, but maintained that the government had a strategy to save on interest costs. Only HK$9 billion would be needed for interest payments in the next financial year, he said.

“The interest rates are relatively high now, so we are issuing some short-term bonds that will mature in two or three years. By then, the interest rates will be lower and it will be cheaper for us to issue [new bonds],” Chan said.

“That’s the main reason part of the money obtained from bond issuance in the next few years will be used to repay [old debts].”

He added that although the annual debt issuance could reach up to HK$135 billion, the government would only use part of the borrowings for infrastructure spending.