Paul Chan should welcome lawmakers’ budget scrutiny, not dismiss it

Financial Secretary Paul Chan Mo-po has successfully secured Legislative Council approval for Hong Kong’s 2026-27 budget, but not without significant scrutiny and debate from lawmakers. Despite the budget passing, legislators raised concerns about the government’s fiscal strategies, particularly the reliance on funds from the Exchange Fund’s investment income. Chan’s plan involves tapping HK$150 billion (US$19.1 billion) from the Exchange Fund to support increased bond issuance aimed at financing the Northern Metropolis megaproject, a major urban development initiative. This approach has sparked controversy because the Exchange Fund is a critical pillar of Hong Kong’s Linked Exchange Rate System and overall financial stability. Critics argue that using these reserves to fund large-scale infrastructure projects represents a high-risk gamble on the city’s future economic prospects. The government’s accounting of bond proceeds and clawbacks from seed capital funds as revenue to achieve a budget surplus has also drawn skepticism, with some lawmakers warning that the fiscal picture may not be as robust as presented. The debate echoes past tensions over budgetary policies during Chan’s tenure, including the 2018 budget when political parties, despite their differences, united in demanding more direct financial relief for citizens amid a record surplus. The current situation highlights ongoing challenges in balancing fiscal prudence with ambitious development goals. Lawmakers’ scrutiny reflects broader concerns about transparency, sustainability, and the long-term impact of leveraging financial reserves for growth projects. The controversy underscores the importance of legislative oversight in Hong Kong’s budgetary process, especially as the city navigates economic uncertainties and strategic investments. While Chan’s administration views the Northern Metropolis project as a vital step for future growth, the debate signals a need for cautious evaluation of funding mechanisms to ensure fiscal stability and public confidence.