Financial Secretary Paul Chan today announced that the Government will raise capital by issuing bonds to ensure the progress of infrastructure works projects crucial to the future development of Hong Kong can proceed on schedule.

While delivering the 2025-26 Budget this morning, Mr Chan said that the capital works expenditure will increase from the previously estimated $90 billion to about $120 billion per annum on average in the future.

Apart from public-private partnerships, in-situ land exchanges and pilot areas for large-scale land disposal, government bonds will be issued as part of the Government’s efforts to leverage market resources more flexibly for the infrastructure works projects to proceed on schedule and deliver early benefits to the economy and the people, he added.

In the five-year period from 2025-26 to 2029-30, a total of about $150 billion to $195 billion worth of bonds will be issued under the Government Sustainable Bond Programme and the Infrastructure Bond Programme annually. About 56% of the bonds issued will be used for refinancing short-term debts.

Noting that the borrowing ceiling of these two bond programmes is expected to increase from the existing level of $500 billion to $700 billion in the Medium Range Forecast (MRF), Mr Chan explained that the ratio of government debt to Gross Domestic Product (GDP) will stay at a prudent and manageable level of 12 to 16.5%, well below most of the advanced economies.

He emphasised that the proceeds from the bond issuance will be used to invest in infrastructure, and not to fund government recurrent expenditure, in strict adherence to the Government’s fiscal discipline.

“As long as the amount of bonds issuance is contained at a level that ensures fiscal prudence, capital can be utilised flexibly and for investing in future economic development, bringing greater returns and benefits to the society.”

The Financial Secretary also stated that in the MRF, the ratio of total government expenditure to GDP will gradually fall from about 24.4% for 2025-26 to about 20.9% for 2029-30.

For 2026-27 and onwards, revenue from land premium is assumed to be progressively rising to 2% of GDP, which is lower than the 20-year average ratio of 3.3%. The growth rate of revenue from profits tax and other taxes will correspond to the economic growth rate in the next few years. 

The ratio of government revenue to GDP will maintain at about 20% starting from 2025-26 as a whole, Mr Chan said, adding that the MRF reflects the proceeds from the annual issuance of government sustainable bonds and infrastructure bonds.

“Based on the above assumptions and arrangements, the deficits in the Operating Account and Capital Account in the next five years will gradually reduce every year.”

The Operating Account may return to a surplus from 2026-27 onwards, while the deficit in the Capital Account will fall progressively from $159.8 billion in 2025-26 to $87.6 billion in 2029-30, Mr Chan pointed out.

After taking account of net proceeds from the issuance of bonds, the Consolidated Account will return to a surplus starting from 2028-29. The aforesaid forecast has not taken into account any tax concessions or relief measures that may be implemented after 2025-26, he noted.