[Yahoo News Report]The government announced the latest fiscal budget yesterday (28th), which was the fourth “red” in five years since 2019/20. The fiscal deficit exceeded 100 billion for the second consecutive year, reaching 101.6 billion. The government has increased bond issuance year after year since 2019/20 to increase “revenue”, and plans to increase bond issuance to RMB 600 billion in the next five years. “Yahoo News” checked the information and found that the bonds issued in recent years have begun to be repaid as early as 23/24. Based on the bond period of 3 years, that is, the government will need to “debt and bond” for at least the next seven years, and the fastest is 28 /In 29, there will be a situation where “new debt is not enough and old debt is not enough”.
Zhuang Tailiang, Executive Director of the Lau Chor Tak Institute of Global Economics and Finance at CUHK, said in an interview with “Yahoo News” that Hong Kong is backed by the Exchange Fund and still has fiscal reserves. It is reasonable for the government to issue bonds, and the current level of bond issuance is also reasonable. Ability to cope with range. He suggested that the government set a limit on debt issuance and “if you have a family, you have to live with it.”
Hong Kong government plans to issue 620 billion bonds in the next five years
The latest fiscal budget announced that the Hong Kong government will issue 120 billion yuan in bonds, the largest amount of debt issuance during Chen Maopo’s tenure. Among them, 70 billion yuan is the retail part, including 50 billion yuan of silver bonds, 20 billion yuan of green bonds and infrastructure bonds.
The Financial Secretary stated in the budget speech that funds raised from bond issuance will not be used to pay for government regular expenditures, but to promote the development of the bond market and promote green and sustainable development and infrastructure projects. He emphasized that government borrowing will be maintained at a healthy level. It is expected that from 24/25 to 28/29, the government debt-to-GDP (gross domestic product) ratio will range from about 9% to 13%, “much lower than most other advanced economies”.
Outsiders worry about financial risks caused by repayments
It is estimated that as of March 31 this year, the fiscal reserves will be NT$733.2 billion; and the expenditure in the 2024/25 financial year will be NT$776.8 billion, which means that Hong Kong’s fiscal reserves are less than the government expenditure in the next year.
The budget mentioned that it plans to issue about 95 billion to 135 billion yuan in bonds every year in the next five years. The government has issued bonds year after year, causing external concerns that using debt as “income” will eventually lead to a fiscal crisis.
After checking the information, the bonds issued by the government in recent years have started to be repaid as early as 23/24. Taking the term of most bonds as 3 years, that is, the government will need “bonds and bonds” for at least the next seven years, and the earliest is 28/29. There will be a situation of “new debt is not enough for old debt” in the year, that is, the debt collection is less than the repayment amount in the same year, and the accumulated bond debt by then will still be at least nearly 300 billion.
Proceeds from government bond issuance in the past 5 years:
19/20 7.8 billion debt
20/21 19.3 billion debt
21/22 35.1 billion debt
22/23 65.9 billion debt
23/24 72.4 billion debt – [還債 8 億]
The following is the budget for the next five years, the income from the issuance of government bonds and the repayment of government bonds.
24/25 (Budget) 120 billion – [還債 242 億]
25/26 (Budget) 135 billion – [還債 448 億]
26/27 (Budget) 135 billion – [還債 549 億]
27/28 (Budget) 135 billion – [還債 1063 億]
28/29 (Budget) 95 billion – [還債 1078 億]
Zhuang Tailiang: Issuing bonds is a reasonable approach and the government can still cope with it
Zhuang Tailiang, executive director of the Lau Chor Tak Institute of Global Economics and Finance at the Chinese University of Hong Kong, said in an interview with “Yahoo News” that given the current economic conditions, bond issuance is a reasonable approach when there is “no choice”. He pointed out that Hong Kong’s finance is calculated based on cash flow. Although the issuance of bonds is not actually revenue, it brings cash flow and is still calculated as revenue on the books. “It can reduce the deficit and redeem some debts in a good year.” “
Although the level of Hong Kong’s fiscal reserves has dropped to less than 12 months of expenditure, Zhuang Tailiang believes that the situation is not serious. Compared with many foreign economic systems, Hong Kong’s exchange fund and fiscal reserves are relatively stable, and the current level of bond issuance is still relatively stable. Have the ability to cope and will not be “insolvent”.
He pointed out that when the bond term expires, it is reasonable to use the surplus to repay the old bonds or issue new bonds. He suggested that the government must be disciplined in its issuance of bonds. It cannot issue unlimited bonds and must set a maximum limit for issuance of bonds. Although Hong Kong has the backing of the Exchange Fund, which can be used in worst-case scenarios, “if you have any wealth, you have to make use of it” and “you don’t have to go all the way.” It is recommended that the overall bond issuance amount be capped at US$100 billion.
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2024-02-29 09:08:10
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