Finance

Opinion | How infrastructure borrowing can benefit Hong Kong for decades to come

Published

2 years ago

February 24, 2024

Opinion | How infrastructure borrowing can benefit Hong Kong for decades to come

Faced with a deficit of more than HK$100 billion (US$12.8 billion) this financial year, the Hong Kong government has proposed issuing bonds to finance large-scale infrastructure projects that could include the Northern Metropolis and land reclamation on Lantau Island.

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.

A construction site for public housing on Hong Kong’s Lantau Island in 2020. Photo: Sam Tsang

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.

But mainland China’s slow recovery, higher interest rates and a strong Hong Kong dollar (the result of the Hong Kong dollar’s peg to the US dollar) have contributed to the city’s current sluggish economic growth and in such an environment, authorities can ill afford to raise taxes that would reduce disposable incomes or consumer spending.

Cutting public spending in other areas is even less realistic than raising taxes. As long as growth remains weak (as is likely the case for 2024), the demand for publicly financed or subsidised services will increase. In the longer term, an ageing population will increase social spending as a share of GDP. While there is merit in reducing some health and welfare subsidies, the fact is that public provision of these services in Hong Kong is already very lean by the standards of developed economies. This also means the savings that can be squeezed in these areas are likely to be very small compared to the expenditure demands of an ageing society. Unless Hongkongers are willing to accept a significantly lower standard of health and welfare provision, there is little chance of public spending decreasing in the coming years.

An elderly man in a park at Cheung Sha Wan. In the longer term, an ageing population will increase social spending as a share of GDP, says academic Donald Low. Photo: Jelly Tse

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.

An electronic ticker at the Exchange Square Complex, which houses the Hong Kong stock exchange, in January. The Hong Kong government should set up rules to ensure debt sustainability and build public trust. Photo: Bloomberg

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.

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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.

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Finance

Fayette County Public Schools Board of Education approves audit contract, new finance director position

Published

1 hour ago

July 7, 2026

Press Room

Fayette County Public Schools Board of Education approves audit contract, new finance director position

LEXINGTON, Ky. (WKYT) – The Fayette County Public Schools Board of Education approved a one-year audit contract capped at $131,750 plus $225 per hour during a virtual meeting Monday, along with a new finance director job description.

The contract is with Mauldin & Jenkins Certified Public Accountants, an Atlanta-based firm, and covers the 2025-26 fiscal year and the restatement of the 2024-25 fiscal year and ancillary services through FY 2029-2030. The work is set to be completed by Nov. 15.

The board approved the contract in a 5-0 vote.

Audit contract details

Interim Chief Financial Officer Kyna Koch said the cost is already accounted for in the district’s budget.

“And is actually less than we expected given our current situation — we were thrilled with the bid,” Koch said.

Koch said she believes this is Mauldin & Jenkins’ first school district audit in Kentucky, but that the firm works with school districts of more than 100,000 students throughout the Southeast.

“Quite frankly when I spoke to the folks at KDE they were thrilled because we’re running kind of short of auditors who want to do school district audits — so all around I think this was a win-win for everyone,” Koch said.

New finance director position

The board also approved a new job description for the position of Director of Finance. Acting Superintendent Dr. Bill Bradford said the title will replace two associate director positions.

“Which will not only save the school district money but it’s also going to streamline our work and align internal controls to make room for a more efficient unit,” Bradford said.

Koch said the position will be posted as soon as possible following the board’s approval.

Closed session

The board went into closed session for more than an hour to discuss pending investigations that could lead to employee discipline. When the board returned, it took no action and adjourned the meeting.

Finance

UK Watchdog Urged to Consider Broader Oversight of AI Financial Firms | PYMNTS.com

Published

11 hours ago

July 6, 2026

Press Room

UK Watchdog Urged to Consider Broader Oversight of AI Financial Firms | PYMNTS.com

The UK’s financial regulator should consider expanding its oversight to cover advanced artificial intelligence models used in financial services, according to a review commissioned by the Financial Conduct Authority (FCA), as policymakers assess whether existing rules can keep pace with rapidly evolving AI technology.

According to Bloomberg, the review recommends that the FCA evaluate whether large language models developed by companies including OpenAI and Anthropic should fall within the regulator’s remit if they play an increasingly significant role in consumer financial services. The report was led by Sheldon Mills, an executive director at the FCA, and was published on Monday.

The review concludes that the UK’s current activity-based regulatory framework does not require a wholesale overhaul. However, it warns that continued advances in AI capabilities and wider adoption of AI-powered financial products could expose gaps in existing oversight if technology providers increasingly influence regulated financial activities, Bloomberg reported.

Among its recommendations, the report calls for a review of the FCA’s regulatory perimeter and suggests strengthening the regulator’s authority under the UK’s Critical Third Parties regime. Such changes could allow the watchdog to exercise greater oversight of technology providers whose services have become integral to financial markets, including major AI developers and cloud infrastructure companies.

The recommendations reflect growing concern that artificial intelligence is reshaping how financial products are designed, distributed and used. Banks and other financial institutions are increasingly deploying generative AI to support customer service, fraud detection, compliance functions and financial guidance, while consumers are also turning directly to general-purpose AI tools for financial information.

The review also raises broader competition and market structure issues. As financial institutions rely on a relatively small number of AI model developers and cloud computing providers, operational dependencies could become concentrated among a handful of technology companies. That concentration may create systemic risks if disruptions or failures affect widely used platforms, while also potentially shifting market power away from regulated financial institutions toward large technology providers.

Those concerns mirror recommendations made earlier this year by the UK Parliament’s Treasury Committee, which urged the government to designate major AI and cloud providers as Critical Third Parties, arguing that regulators need stronger supervisory tools as digital infrastructure becomes increasingly central to financial stability.

The FCA launched the Mills Review in January to examine how artificial intelligence could transform retail financial services by the end of the decade. The consultation considered AI’s impact on competition, consumer behavior, market structure and the regulatory framework, with the aim of identifying whether financial regulation should evolve alongside technological change.

According to Bloomberg, the FCA will now consider the report’s recommendations, including whether its regulatory responsibilities should be expanded to reflect the growing influence of general-purpose AI systems in financial services. Any changes to the regulator’s statutory powers would require action by the UK government and would form part of broader efforts to balance innovation, consumer protection, financial stability and effective competition as AI adoption accelerates.

Source: Bloomberg

Finance

MAS moves to rein in autonomous AI agents in finance

Published

21 hours ago

July 6, 2026

Press Room

MAS moves to rein in autonomous AI agents in finance

The Monetary Authority of Singapore (MAS), the city state’s central bank and financial regulator, has joined forces with major financial institutions and FinTechs to release a white paper aimed at keeping AI agents in finance operating within safe limits.

The paper, called Safeguards for Agentic Finance at Runtime (SAFR), lays out an industry-built framework designed to let AI agents perform financial tasks in a manner that is safe, secure and dependable. It has been produced under BuildFin.ai, the MAS programme that backs the responsible creation and rollout of AI tools across the financial sector.

The push comes as AI agents take on more autonomous work at a pace that makes hands-on human oversight impractical. In response, firms require real-time controls that keep agent behaviour inside the mandates, policies and risk limits they have defined. SAFR answers this with a series of governance checkpoints that check and log each action an agent proposes before that task is carried out.

The framework extends the AI Risk Management toolkit created through MAS’ Project Mindforge, concentrating on how protections can be put into practice at the moment an agent acts. The white paper maps out how measures such as policy bound execution, real time validation, auditability and interoperability can be woven into system operations, giving institutions the confidence to deploy agents consistently.

Industry participants have already tested SAFR in several settings. These include agent-assisted payments and treasury work, where agents handle routine transactions inside set mandates to cut friction and lift efficiency; wealth management and advisory processes, where agents examine documents and produce structured assessments within tightly defined task limits to speed up compliance reviews; and client engagement, where agents create insights and draft materials within approved content boundaries so staff can serve clients more productively.

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