|
Title: |
|
Authors:
|
|
Abstract: Hong Kong’s
public finances have entered a period of heightened scrutiny following the
recent expansion of the government bond issuance ceiling to HK$900 billion to
finance ambitious infrastructure projects, including the Northern Metropolis
(NM) development. Despite official projections maintaining a government Debt-to-GDP
ratio at a prudent 12-16.5% level during the Medium Range Forecast (MRF)
period, this paper project the Debt-to-GDP ratio will be more than 20% in
beyond 2030’s, so, we argues that such metrics understate underlying
vulnerabilities inherent in Hong Kong’s currency board arrangement. The Linked
Exchange Rate System (LERS) precludes independent monetary policy, compelling
interest rates to shadow U.S. Federal Reserve decisions and amplifying fiscal
leverage risks amid volatile revenue streams from land sales, stamp duties, and
property markets. Drawing on monetary economics and fiscal theory, including
Ricardian equivalence and debt sustainability analysis, this study examines the
interplay between structural deficits, contingent liabilities from large-scale
public works (infrastructure project), and the credibility of the LERS. Policy
recommendations emphasize administrative competency gains through new tech
adoption in tax administration, and supply-side diversification of the tax base
via regulated gaming in order to maximize the revenue, and
Build-Operate-Transfer (BOT) models for infrastructure in order to minimize the
expenditure. These measures aim to enhance fiscal resilience, broaden the
revenue base, and safeguard intergenerational equity without compromising the
currency peg’s stability. The analysis underscores that sustained fiscal
prudence is essential for maintaining investor confidence and Hong Kong’s role
as an international financial center. DOI: https://doi.org/10.51505/IJEBMR.2026.10802 |
|
PDF Download |