Despite the adverse impact of the budget deficit in Hong Kong has been alleviated since the economic recovery from 2003, the fiscal deficit may return when there is another downturn in the economy if the problem is not handled fundamentally.Based on the economic and political situation from 1998 to 2003,the factors that lead to the budget deficit in Hong Kong are analyzed in four perspectives,including(a)increase in public expenditure;(b)decrease in public revenues;(c)poor management of public money and(d) weak administration.With a better understanding on these factors, possible solutions to the fiscal problem faced by the government may be developed. Despite the adverse impact of the budget deficit in Hong Kong has been alleviated since the economic recovery from 2003, the fiscal deficit may return when there is another downturn in the economy if the problem is not handled fundamentally.Based on the economic and political situation from The factors that lead to the budget deficit in Hong Kong are analyzed in four perspectives, including (a) increase in public expenditure; (b) decrease in public revenues; (c) poor management of public money and (d) weak administration .With a better understanding on these factors, possible solutions to the fiscal problem faced by the government may be developed.