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BUDGET RESULTS CONTINUE TO ILLUSTRATE NEED FOR SPENDING RESTRAINT AND REVENUE ENHANCEMENT Chamber Chief Economist, Ian K Perkin, comments on Hong Kong SAR Governments financial results for the opening five months of the fiscal year. The SAR Government appears to be headed for a record deficit this year, well in excess of the 2001-02 outcome of $63.2 billion. The Governments financial results for the opening five months of the 2002-03 fiscal year certainly illustrate the urgent need for continued Budget spending restraint in the face of a still uncertain economic outlook and a lacklustre revenue performance. The fiscal, or Budget, deficit of slightly over $56 billion in the April-August period of the current fiscal year is the worst ever recorded for the period. So, too, is the August monthly deficit of $15.96 billion, surpassing the $14.7 billion in August last year. While it is true that the Governments revenue flows peak in the final months of any fiscal year, the present economic climate suggests that it will not be able claw back enough this fiscal year to meet the forecast deficit figure of $45.2 billion. Government revenue is likely to fall short of its expectations in terms of land premium revenue, earnings on the fiscal reserves and both profits and salaries taxes. There will also be no revenue from a further issue of shares in the MTR Corporation. The Administration has also frozen many fees and charges for the current fiscal year, further reducing its potential revenue. At the same time, expenditure continues to run at relatively high levels and the cut in civil service salaries from tomorrow (October 1) will bring only modest relief on this side of the Governments financial statement. Given current economic conditions, the need for spending restraint is clear. The Government may also have to re-examine the report it has received on alternative sources of revenue and the internal report of its Task Force on future revenue needs. For further information, contact: Ian K Perkin, Chief Economist, 2823-1242 |
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