Govt Prudent On Budget Measures

The Government must exercise prudence in formulating budget measures that may lead to an increase in the fiscal deficit, such as issuing consumption vouchers or handing out cash to citizens.

Acting Secretary for Financial Services & the Treasury Joseph Chan made the statement when responding to a lawmaker’s question today.

Mr Chan said the Government has received views proposing the handing out of consumption vouchers or cash to citizens to boost consumption, help affected trades and industries and stabilise the economy and the employment market.

He said issuing consumption vouchers involves additional and more complicated administrative arrangements that may result in relatively high administrative costs.

Such arrangements include determining the scope of coverage, usage terms, redemption arrangements as well as control and anti-counterfeiting measures.

He added that the effectiveness of issuing consumption vouchers may be undermined by the substitution effect.

For example, if some people use such vouchers mainly to meet basic living expenses rather than on additional consumption, the effect on boosting consumption and stimulating the economy may not meet expectations.

The Government must take into account the long-term fiscal position in addition to the measures’ effectiveness in formulating budget measures, Mr Chan said.

He noted that the Government will likely have a deficit for the current financial year and issuing consumption vouchers or handing out cash to the public will lead to an increase in the fiscal deficit.

The Government must be very prudent in this regard and carefully consider public acceptance of a large deficit and assess the reaction of international rating agencies, he added.