Govt Forecasts $101.6b Deficit

(To watch the 2021-22 Budget speech with sign language interpretation, click here.)

In his Budget speech today, Financial Secretary Paul Chan said that to combat the epidemic and roll out relief measures, the Government has increased expenditure substantially in the past year, leading to a plunge in the fiscal reserves in two years from the equivalent of 23 months of government expenditure to 13 months.

Mr Chan said he expects the fiscal deficit for the next financial year to be $101.6 billion and for Hong Kong to record a deficit for four consecutive years afterwards.

He noted that facing the challenges of fiscal deficits, the Government should not only reduce expenditure but also increase revenue.

The rate of stamp duty on stock transfers will be raised from the current 0.1% to 0.13% of the consideration or value of each transaction payable by buyers and sellers respectively.

The finance chief said the Government will review the case for introducing a progressive element to the rating system and that for providing a rates concession to owner-occupied properties on a regular basis.

In cutting expenditure, the Government will have zero growth in the civil service establishment in 2021-22. All policy bureaus and departments are required to save spending, aiming to trim recurrent expenditure by 1% in 2022-23. The estimated savings will be about $3.9 billion.

However, Mr Chan stressed that spending in areas related to people’s livelihood, including education, social welfare and healthcare, will not be reduced.

The 2020-21 revised estimate on government revenue is $543.5 billion, mainly due to a substantial fall in revenue from land premiums.

Expenditure is $820.4 billion, 12.2% higher than the original estimate, mainly because of injections into the Anti-epidemic Fund.

All in all, a deficit of $257.6 billion is forecast for 2020-21. Fiscal reserves are expected to be $902.7 billion by March 31 next year.