Hong Kong's government ran a HK$16.2 billion surplus in the first half of its fiscal year, but only because it borrowed heavily: HK$131 billion of bond proceeds covered a HK$101.3 billion gap between spending and revenue in the six months to Sept. 30, figures released on Oct. 30 showed.

For investors, the numbers show how far Hong Kong now leans on the bond market, and on older residents' savings, to fund infrastructure while tax receipts lag. Government debt reached HK$529.5 billion at the end of September, equal to about 78% of fiscal reserves of HK$681.7 billion. The city's public finances also back the Hong Kong dollar peg, and they set the supply of local-currency government paper that banks and insurers hold.

Spending outran revenue by HK$101.3 billion

Expenditure from April to September totaled HK$373.1 billion, against revenue of HK$271.8 billion, according to the consolidated account published by the government. After adding HK$131 billion raised from bond sales and subtracting about HK$13.6 billion of principal repaid, the account showed the HK$16.2 billion surplus.

A government spokesperson said the surplus was mainly due to proceeds from the issuance of Silver Bonds. The spokesperson added that salaries and profits taxes, the largest revenue items, mostly arrive toward the end of the fiscal year, a pattern that makes first-half deficits routine.

September did most of the work. In that month alone, revenue was HK$22.6 billion and expenditure HK$62.1 billion, a HK$39.5 billion shortfall before borrowing. Bond proceeds of HK$74.8 billion turned that into a monthly surplus of HK$35.2 billion and lifted reserves from HK$646.6 billion at the end of August.

The first quarter had its own one-off support. The government reported a HK$12.8 billion surplus for April to June, which it attributed mainly to a HK$75 billion transfer from the Exchange Fund to the Capital Works Reserve Fund in June under the 2026-27 budget. It said at the time that the surplus would taper off because the transfer would not recur. Reserves stood at HK$678.3 billion at the end of June, so the July to September quarter added only about HK$3.4 billion despite September's bond sale.

Silver Bonds carry the load

The Silver Bond is a three-year retail bond open to Hong Kong Identity Card holders who turn 60 in or before 2027, according to the government's Aug. 6 launch announcement. It carried a guaranteed minimum rate of 4.25%, TVB News reported. The latest issue drew 476,703 valid applications seeking HK$119.3 billion when subscriptions closed on Sept. 4, the Hong Kong Monetary Authority said. The government raised the issue size to HK$55 billion from a HK$50 billion target and capped allocations at 13 units of HK$10,000 each.

The fiscal statement listed HK$163.1 billion of Silver Bonds outstanding at the end of September, maturing in October 2027, October 2028 and September 2029, and redeemable early at holders' request. Those sit beside HK$207.9 billion of green bonds and HK$158.5 billion of infrastructure bonds, issued in U.S. dollars, euros, renminbi and Hong Kong dollars. The government also guaranteed HK$104.4 billion of other debt, under schemes that include loan guarantees for small and medium-sized enterprises.

Hong Kong dollar deposits fell in September, as HKMA data released the same day showed. In the government's accounts, financing from the domestic banking sector, which includes the Exchange Fund, was a negative HK$18.7 billion over the six months, the counterpart of the surplus it booked.

Reserves rebuilt from last year's low

The latest reserve figure compares with HK$665.5 billion on March 31, 2026, and HK$597.5 billion at the end of October 2025, when the government reported a HK$56.8 billion deficit for the first seven months of that fiscal year.

The 2025-26 year itself ended better than planned. The government booked a provisional surplus of HK$11.2 billion, HK$8.3 billion above its revised estimate, helped by higher-than-expected profits tax, stamp duties and land premium. That result also depended on HK$156 billion of bond proceeds, and spending of HK$790.3 billion still exceeded revenue of HK$697.5 billion.

Stamp duty is the item most exposed to Hong Kong's market cycle. A busy equity market lifts it, and IPO fundraising this year is on a record pace, while land premium depends on how developers bid for sites in a soft property market.

Some HK$16.6 billion of bonds under the separate Government Bond Programme, whose proceeds sit in the Bond Fund outside fiscal reserves, mature between October 2026 and September 2027, according to the statement. Last year, the government released its seven-month figures on Nov. 28.