| Assessment and Conclusion
|
| Consolidated Account |
| 109. If the economy grows according to our projections and all the foregoing expenditure-cutting and revenue-raising measures are successfully implemented, we will achieve our three fiscal targets, i.e. restoring balance in the Operating and Consolidated Accounts and reducing public expenditure to 20% of GDP or below in 2006-07. |
Year
|
2003-04
($ billion)
|
2004-05
($ billion)
|
2005-06
($ billion)
|
2006-07
($ billion)
|
2007-08
($ billion)
|
Operating revenue
|
149.2
|
166.0
|
181.9
|
190.9
|
194.5
|
Operating expenditure
|
213.6
|
212.2
|
203.4
|
199.8
|
203.0
|
Operating surplus /
(deficit) before investment income from fiscal reserves
|
(64.4)
|
(46.2)
|
(21.5)
|
(8.9)
|
(8.5)
|
Operating surplus /
(deficit) after investment income from fiscal reserves
|
(53.4)
|
(37.4)
|
(13.1)
|
(0.5)
|
0.3
|
Capital revenue
|
32.2
|
50.5
|
50.7
|
48.7
|
45.1
|
Capital expenditure
(including expenditure from the Capital Investment Fund)
|
47.8
|
53.3
|
54.4
|
41.0
|
37.9
|
Consolidated surplus /
(deficit)
|
(67.9)
|
(38.2)
|
(15.8)
|
8.1
|
8.4
|
Consolidated surplus /
(deficit) as a percentage of GDP
|
(5.3%)
|
(2.9%)
|
(1.1%)
|
0.6%
|
0.6%
|
|
110. Including the extraordinary expenditure of $3.3 billion for implementing the second VR Scheme, we forecast an operating deficit of $53.4 billion for 2003-04, $0.4 billion more than the forecast operating deficit for 2002-03. The operating deficits will gradually decline, falling to $0.5 billion in 2006-07.
|
111. In respect of the consolidated account, we estimate that a deficit of $67.9 billion will occur in 2003-04, $2.1 billion less than 2002-03. The consolidated deficit will decrease over the next two years and will register a surplus of $8.1 billion in
2006-07.
|
| Fiscal Reserves |
112. Forecasts for our fiscal reserves are as follows:
|
Year
|
2003-04
|
2004-05
|
2005-06
|
2006-07
|
2007-08
|
Fiscal reserves
($ billion)
|
239.1
|
200.9
|
185.1
|
193.3
|
201.7
|
As number of months of
government expenditure
|
11
|
9
|
9
|
10
|
10
|
|
| 113. In the next five years, our fiscal reserves will be maintained at a level between $190 billion and $240 billion, the equivalent of nine to 11 months of government expenditure, and lower than the 12-month guideline I proposed last year. As the community and the economy cannot cope with too vigorous expenditure-cutting and revenue-raising measures, I believe it is acceptable for the fiscal reserves to be maintained at this level, even though this is not entirely satisfactory. Nevertheless, due to the significant reduction in the fiscal reserves exclusive of the Land Fund, we will move an amendment Resolution in this Council shortly to permit the transfer of funds from the Land Fund to the General Revenue Account in order to meet government expenditure requirements.
|
|
|
|
|
|
|
|
| Revenue-raising and Expenditure-cutting Measures
vis-a-vis Economic Growth |
114. In proposing the various fiscal measures, the Government has taken into account their impact on the overall economy. The proposed measures will have only minimal impact since, based on the econometric model adopted by the Government, the growth rate of our economy and price movement will adjust downwards as a result by an annual average of 0.14% and 0.21% respectively between 2003 and 2007.
|
115. We believe that the package of measures announced this afternoon will enable us to restore balance in our public finances over the medium term, thereby eliminating a factor that may lead to a financial crisis. Investors?confidence in Hong Kong will also be enhanced. People's anxiety about the future will be alleviated when they see that the tax increases and expenditure cuts in the coming years will be mild.
|
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