Finance
Opinion | How infrastructure borrowing can benefit Hong Kong for decades to come
This proposal makes sense. Hong Kong’s public debt to gross domestic product ratio is extremely low by international standards; the government therefore has the space and creditworthiness to borrow more – even though interest rates today are higher. There is also a strong economic case to rely on debt financing for infrastructure projects which incur costs today but generate benefits for the next few decades.
Nonetheless, there are concerns among some that such borrowing only deepens the government’s financial hole, burdens future generations, and masks the precarity of government finances. Rather than dismiss these concerns as invalid or ignorant, the government should engage seriously with them and, in so doing, build society’s trust in its ability to manage Hong Kong’s finances well. This is also an opportunity to educate the public on why borrowing for infrastructure is not only necessary, but may even be desirable in the current macroeconomic context.
Necessary and desirable
The first principle of public financial management that the Treasury should convey is that all deficits have to be financed eventually. In this, the government has to choose between three unpalatable options: raising taxes, cutting spending, or borrowing. Raising taxes – particularly the introduction of a Goods and Services Tax (GST) – is probably something that Hong Kong must do eventually.
That leaves increased public sector borrowing as the least bad option to finance Hong Kong’s infrastructure plans.
The second idea that the Treasury should convey is that borrowing is the more efficient and equitable way of financing infrastructure. It is more efficient because the benefits of infrastructure development accrue over many years – even decades – and so it makes sense to finance that development over a similar time frame. Just as households make costly capital purchases (such as a property) by taking a 30-year loan rather than pay for it entirely with cash, it is also more efficient for the government to finance infrastructure projects (which generate a stream of benefits over many years) using debt.
Debt financing is also more equitable because future generations are the major beneficiaries of these infrastructure projects. Future generations are likely to be richer than current generations, so it is only fair that future generations pay at least part of the costs. Meanwhile, paying for these projects with cash upfront represents a large subsidy from past and current generations of Hongkongers to future, richer generations. This is highly regressive. Unless one is extremely pessimistic about Hong Kong’s future – and believes that future Hongkongers would be poorer than today’s Hongkongers – debt financing is much fairer in terms of intergenerational equity.
A debt sustainability framework
While increased borrowing is a better way to finance infrastructure development, this does not mean the government should be allowed to borrow as much as it wants or to spend however it likes. To build public trust, the Treasury should put in place, and articulate, a set of principles to ensure debt sustainability. Such a framework would also assuage concerns that the Hong Kong government is becoming a less prudent or capable steward of public funds.
The first principle is that debt financing should be used only for infrastructure projects in which assets that can be valued are created. This is critical because debt financing creates liabilities for future generations of Hongkongers. Good financial management requires that these liabilities be matched with corresponding, long-term assets. This rule also means the government should borrow only for capital, not operating, expenditures.
Second, alongside the budget (that shows the government’s income and expenditure of the coming financial year), the Treasury should also present a debt sustainability report which shows the government’s outstanding liabilities and the estimated value of the assets. This need not be done for all the state’s assets and liabilities, only for those that result from its borrowing. The first two principles would address concerns that issuing debt boosts the government’s revenue for the year but masks (future) debt repayment obligations.
Why Hong Kong’s economy needs to become more than just China’s superconnector
Why Hong Kong’s economy needs to become more than just China’s superconnector
Third, to the extent possible, the bonds the government issues should be linked to specific projects rather than be used for unspecified capital expenditure. While public funds are fungible (movable across various uses), this practice would require the government to make a strong case for the projects that it is borrowing for, and not rely only on its overall creditworthiness, to borrow at lower interest rates. This practice would also improve financial transparency and support the market’s scrutiny of the government’s development projects. Done well, this would establish Hong Kong as an issuer of high-quality government bonds, helping the city attract more capital through its bond market.
This principle does not mean the government would be barred from issuing bonds not linked to specific projects. But if it does so, it should have to explain why. Without this principle, governments always prefer more discretion over rules that constrain their flexibility or freedom of manoeuvre.
Finally, there should be a rule that sets a cap on the total stock of debt that the Hong Kong government owes, as well as a rule that limits (as a percentage of GDP) the amount of debt the government can issue in any one financial year. This would assure the public and financial markets that the government is still a disciplined steward of public funds.
Donald Low is Senior Lecturer and Professor of Practice, and Director of Leadership and Public Policy Executive Education, at the Hong Kong University of Science and Technology. He was formerly Director of Fiscal Policy at the Ministry of Finance in Singapore.
Parents who put money into their children’s “Trump Accounts” might face a headache come tax time: Even the smallest contributions may require them to fill out a little-used gift tax form that can take hours to complete.
Several tax experts have raised concerns about the new savings vehicles, which were created in Republicans’ massive tax and spending bill this summer, and have urged Congress to pass a new law so that families who use it won’t have to file gift tax returns.
“It’s going to create a compliance nightmare,” said Amber Waldman, senior director for estate and gift tax for RSM US, a tax and consulting firm.
Under the terms of the One Big Beautiful Bill law that created it, the federal government will seed each Trump Account with $1,000 for every U.S. citizen born from 2025 through 2028. Much like an individual retirement account, the money will be invested in funds that track the stock market. The idea is that children’s growing pot of money will eventually help them pay for education or a home purchase when they become adults.
Parents, relatives, employers and nonprofits also can contribute to the accounts. Businessman Michael Dell and his wife Susan have pledged to put $250 in each of the accounts of 25 million children who are younger than 10 today.
But some tax experts think lawmakers overlooked a tax requirement that could make the accounts too burdensome for most parents.
A contribution to a child’s Trump Account is a taxable gift, which requires the giver to fill out one of the IRS’s more complicated tax forms, Form 709. The 10-page document takes the average filer or their accountant more than six hours to complete, and the government has only accepted mailed submissions; that changes this coming tax season, when e-filing will become available.
It’s used by fewer than 225,000 households a year, federal data show, and is so obscure that commercial tax software like TurboTax doesn’t include it.
“If you want to apply for the $1,000 because your kid was born within the time period, fine. If your employer wants to make a contribution or you qualify for a contribution from a charitable organization … fine. But don’t put your own money in until this is clarified,” said Susan Bart, a lawyer who specializes in estate and gift tax.
Most gifts aren’t nearly this complicated. Under long-standing law, most people can give cash gifts to one another tax-free. But if it’s a sizable amount – more than $19,000 – the IRS requires the donor to file Form 709. Over time, if those gifts add up to more than $15 million in the giver’s lifetime, they need to pay certain taxes. The whole system is meant to prevent very wealthy people from doling out large cash gifts during their lifetimes so their heirs can avoid estate taxes later.
But because there’s no provision for contributions to Trump Accounts to count as exempt gifts under current tax law, donors would have to declare every contribution, several tax experts say. This applies whether the donation is $25 or as much as the $5,000 annual cap. That’s because to be considered a tax-exempt gift, the recipient has to be able to access the money right away. Trump Account beneficiaries cannot withdraw the money until they turn 18.
Asked whether Trump Account contributions are required to be reported, an IRS spokesman referred questions to the Treasury Department, where several officials did not answer questions from The Washington Post.
The American College of Trust and Estate Counsel, a lawyers group, sent a letter raising the issue to the congressional tax-writing committees last month. The group’s Washington affairs chair Kevin Matz said his group received no answer beyond acknowledgment that the letter was received.
Congress has dealt with a problem like this before. Lawmakers approved a clause exempting 529 accounts – the tax-advantaged savings accounts for a child’s education – from the requirement that the recipient have present use of the gift. That means parents, grandparents and others can put money in 529 accounts without filing gift tax returns.
The experts who raised the issue are calling on Congress to make the same legislative fix for Trump Accounts.
“It seems like legislators accidentally left that out,” Waldman said.
The 10-page tax form asks a series of questions that are nearly indecipherable to the uninitiated. It distinguishes gifts that are “generation-skipping” – such as a grandparent giving money to a grandchild. When a married couple makes a gift, it probes whether the amount can legally be considered split between them, or attributable to just one.
Even experts scratch their heads. “Not all accountants necessarily have the experience and background to be able to complete it without extensive study,” Matz said.
Bart agreed: “It’s not a DIY form by any means.”
She said she’s seen lawyers befuddled by Form 709 before. “Sometimes my partners in other practice areas who are very, very smart people, they think: I can do this for my own kid or grandchild. They come running back after they look at the form a while. You need to be a specialized attorney with a lot of experience in the area.”
Many people might contribute to Trump Accounts without knowing that they are supposed to file Form 709, and aren’t likely to file it. But experts believe that skipping the form could create problems for the parents if they’re ever audited. Or if tax software like TurboTax starts including Trump Account questions, the taxpayer might not be able to submit their returns through the software if they indicate that they gave to the accounts.
Parents can still create Trump Accounts for their children to receive money from the government and charities like Dell’s without triggering the tax form problem.
“Of course if the government’s giving you a free $1,000, go ahead and take it. That’s not going to hurt you,” Waldman said. “If you’re thinking about personally contributing, consider your other options.”
Even without the tax-filing complications, Trump Accounts might not be the best way for most parents to save money for their children, experts say. The 529 plans offer much better tax benefits – unlike Trump Accounts, parents can often take some state tax deductions when they put money into the account, and if the child uses the money to pay for education, the earnings inside the account are never taxed.
If parents want a multipurpose savings vehicle for their kids that is not just limited to education spending, an ordinary taxable brokerage account might also be a better choice, tax professionals say. Trump Accounts are untaxed during the beneficiary’s childhood, when the money is growing in the account, unlike a brokerage account that could require paying taxes on any dividends. But the tax treatment when the child does withdraw the money could be much more favorable on the brokerage account – that money gets the lower capital gains tax rate, while Trump Account withdrawals are taxed at the same rate as ordinary income, and even come with a 10 percent tax penalty if the child doesn’t use the money for a qualified purpose. And the brokerage account offers a much wider range of investment options.
“As a tax-advantaged account, it’s a terrible tax-advantaged account,” said Greg Leierson, senior fellow at New York University’s Tax Law Center.
Israel’s Cabinet approved a proposal for 19 new settlements in the occupied West Bank, the far-right finance minister said on Sunday.
The settlements include two that were previously evacuated during a 2005 disengagement plan, according to Finance Minister Betzalel Smotrich, who has pushed a settlement expansion agenda in the West Bank.
It brings the total number of new settlements over the past two years to 69, Smotrich wrote on X.
The approval increases the number of settlements in the West Bank by nearly 50% during the current government’s tenure, from 141 in 2022 to 210 after the current approval, according to Peace Now, an anti-settlement watchdog group. Settlements are widely considered illegal under international law.
The approval comes as the U.S. is pushing Israel and Hamas to move ahead with the new phase of the Gaza ceasefire, which took effect Oct. 10. The U.S.-brokered plan calls for a possible “pathway” to a Palestinian state — something Smotrich says the settlements are aimed at preventing.
The Cabinet decision included a retroactive legalization of some previously established settlement outposts or neighborhoods of existing settlements, and the creation of settlements on land where Palestinians were evacuated, Peace Now said.
Israel captured the West Bank, east Jerusalem and Gaza — areas claimed by the Palestinians for a future state — in the 1967 war. It has settled more than 500,000 Jews in the West Bank, in addition to over 200,000 more in contested east Jerusalem. About 15% of settlers are Americans.
The United Nations calls the settlements, which are scattered inside the West Bank and East Jerusalem, illegal.
Israel’s government is dominated by far-right proponents of the settler movement, including Smotrich and Cabinet Minister Itamar Ben-Gvir, who oversees the nation’s police force.
According to the U.N., settler expansion has been compounded by a surge of attacks against Palestinians in the West Bank in recent months.
During October’s olive harvest, settlers across the territory launched an average of eight attacks daily, according to the United Nations humanitarian office, the most since it began collecting data in 2006. The attacks, the U.N. reported, continued in November, with the agency recording at least 136 more by Nov. 24.
Palestinian officials said settlers burned cars, desecrated mosques, ransacked industrial plants and destroyed cropland. Israeli authorities have issued condemnations of the violence, but made few arrests.
XRP has continued to trade lower as crypto prices weaken across the board, with the total market shedding more than $1.3 trillion since October.
During the past three months, XRP has dropped more than 30%, keeping pressure on sentiment even as some commentators argue the token’s purpose goes far beyond short-term price moves.
Retail Vs. Institutional Viewpoint
According to health and finance commentator Dr. Camila Stevenson, much of the debate around XRP misses how large financial players judge settlement tools.
Everyday traders tend to focus on charts and quick exits. Banks do not. They look at whether a system can handle stress, move large sums, and keep working when conditions worsen. Stevenson compared it to infrastructure testing, where strength and capacity matter more than the initial cost.
XRP Was Built For Flows
Based on reports from her recent video discussion, XRP was structured to act as a bridge for moving value, not as a speculative chip. With a fixed supply, the token cannot expand in quantity to meet higher transaction demand.
Stevenson said that leaves price as the only way to support larger volumes. Analyst XFinanceBull echoed this view, encouraging market watchers to think in terms of flows rather than daily price action. Price Alone Does Not Prove Use
Even so, market behavior still plays a major role. XRP trades in open markets, and speculation continues to influence price direction.
A higher price may improve efficiency, but it does not guarantee adoption. Stevenson pointed out that many institutions position through custodians, OTC desks, and private agreements.
These transactions often happen quietly and may not show up as sharp moves on public charts. Sudden spikes during positioning, she warned, would suggest instability rather than healthy use. Why Higher Price Helps
Stevenson argued that banks moving billions would rather use fewer units that each represent more value. Fewer tokens can mean simpler settlement and less risk of slippage during busy periods.
Large financial systems tend to fail when money cannot move or when settlement slows, not when prices fall. In that context, a higher XRP price could support smoother transfers if volumes rise enough to test the system.Market Reality Remains Mixed
Despite the theory, clear proof of large-scale institutional demand remains limited. Regulation, liquidity depth, and reliable access still shape whether banks commit real volume.
XRP’s 33% slide over recent months shows how quickly sentiment can shift, even as long-term use cases are debated. The idea that banks prefer a higher XRP price rests on future scale, not current trading patterns.
Featured image from Unsplash, chart from TradingView
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