Financial Secretary Paul Chan revealed in today’s Budget that total government revenue for 2025-26 is projected to be $659.4 billion, while total government expenditure will be $822.3 billion.

Taking into account bond issuance of about $150 billion and repayments of about $54.1 billion, a deficit of $67 billion is expected.

The fiscal reserve will decrease to $580.3 billion.

Public finances

Expounding on the Government’s fiscal position in his Budget speech, Mr Chan said government revenue and government expenditure are broadly reflected in the Operating Account and the Capital Account.

Revenue in the Operating Account mainly comes from tax revenue, investment income, and government fees and charges. Meanwhile, expenditure is largely attributable to the Government’s daily expenses.

The Capital Account’s revenue is mainly land-related, while its expenditure largely involves infrastructure works projects and land acquisition.

The finance chief stressed that the Operating Account should be managed on the basis of keeping expenditure within the limits of revenues, with the target of achieving a surplus.

“As for the Capital Account, expenditure on infrastructure works is our investment for the future. For instance, the Northern Metropolis development, which will bring economic and social benefits upon completion, has to be taken forward to meet the needs for social and economic development.

“However, as revenue is susceptible to economic cycles, there may be a shortfall between revenue and expenditure. Under such circumstances, we can utilise the surplus in the Operating Account or our fiscal reserves as support, or make flexible use of market resources, including various forms of public private partnership and bond issuance.”

Revised estimates for 2024-25

The Financial Secretary reported that the 2024-25 revised estimate of total government revenue is $559.6 billion, lower than the original estimate by 11.6%.

Revenues from profits tax and salaries tax remained stable at $177.7 billion and $88 billion respectively, with these figures comparable to the original estimates.

Mr Chan emphasised that the incomes from profits tax and salaries tax demonstrate the strong resilience of Hong Kong’s economy.

However, as the asset market is under pressure, government revenues from land premiums and stamp duties have declined. Revenue from land premiums is $13.5 billion, substantially lower than the original estimate by $19.5 billion. Revenue from stamp duties of $58 billion is lower than the original estimate by $13 billion.

The revised estimate of total government expenditure for 2024-25 is $754.8 billion, lower than the original estimate by $22.1 billion. Of this, recurrent expenditure is $562.5 billion, lower than the original estimate by $17.7 billion.

Taking into account the issuance of government bonds of $130 billion and repayments of $22.1 billion, the finance chief expects that there will be a consolidated deficit of $87.2 billion for 2024-25.

Fiscal reserves are expected to be $647.3 billion by 31 March.

Estimates for 2025-26

Looking ahead to 2025-26, the Financial Secretary outlined that the Government will continue to allocate resources towards consolidating momentum on economic growth, promoting the accelerated development of the information and technology industries, and enhancing public services.

“We will also increase capital works expenditure to cater for the Northern Metropolis and other public works projects relating to the economy and people’s livelihood, so as to support the sustained economic development of Hong Kong.”

In his Budget speech, Mr Chan announced that total government expenditure for 2025-26 will grow by 8.9% to $822.3 billion, with its ratio to nominal gross domestic product projected to be 24.4%.

Recurrent expenditure for 2025-26 will rise 4.5% to $588.1 billion.

“Of this, substantial resources will still be allocated to livelihood-related policy areas including healthcare, social welfare and education, involving a total of $348.6 billion, representing about 60% of recurrent expenditure.”

Non-recurrent expenditure will decrease by 3.4% to $36.1 billion.

He also announced that total government revenue for 2025-26 is estimated to be $659.4 billion, while revenue from earnings and profits tax are estimated to be $301.2 billion, an increase of 8.4% over the revised estimate for 2024-25.

Revenue from land premiums is estimated to be $21 billion, a 55.3% jump over the revised estimate for 2024-25. Revenue from stamp duties is estimated to be $67.6 billion, a 16.5% increase over the revised estimate for 2024-25. In addition, the Government will bring back about $62 billion from six endowment funds established outside the government accounts.

Looking ahead, Mr Chan said: “We forecast that the Operating Account will largely achieve balance in 2025-26, and return to a surplus starting from 2026-27.”

The Capital Account is estimated to record a deficit in the Medium Range Forecast period due to the Northern Metropolis’ accelerated development and other public works projects, he added.

“Nevertheless, the level of deficit will decline year on year from 2026-27 onwards.”