HK Government to Pursue Prudent Management of Public Finances: Leung

Home>>Business

Last updated at: (Beijing Time) Wednesday, March 06, 2002

HK Government to Pursue Prudent Management of Public Finances: Leung

DISCUSSION

CHINESE

SEND TO FRIEND

The Hong Kong government will continue to follow the guiding principle of prudent management of public finances and strive to achieve a fiscal balance, Hong Kong Financial Secretary Antony Leung said in his maiden budget speech Wednesday.

Leung admitted that Hong Kong's public finances are currently confronted with structural problems, as the Task Force on Review of Public Finances pointed out in its findings published two weeks ago.

On the revenue side, consolidation in the property market has resulted in a structural diminution in revenue from land premiums, profits tax from the banking and property sectors, and stamp duty on property transactions, he said.

The investment income from Hong Kong's fiscal reserves will also suffer a structural reduction, as successive years of fiscal deficits result in a rundown of the reserves, and as the anticipated rate of return on investment income is likely to drop alongside low inflation in the years ahead, he added.

However, on the expenditure front, the Task Force pinpointed price rigidity in government expenditure, which is particularly severe in times of deflation, Leung said.

In the recent years of economic downturn, the government has also consciously embraced counter-cyclical fiscal policies, Leung said, warning that as the economy recovers, measures to redress these will have to be taken.

Otherwise, Hong Kong's fiscal policies would be out of line with the economy, and this would exacerbate the structural problem in its finances, he said, pledging that the government would never let the fiscal reserves be depleted.

Leung in his budget speech set out goals for four issues concerning the management of public finances, namely public expenditure as a share of the economy, basis for comparison of growth in expenditure and the economy, consolidated and operating balances, and purpose and level of fiscal reserves.

The share of public expenditure in the economy rose to 22 percent in 2001-02, from an average of 16 percent in the mid-1980s, Leung said, pledging that to maintain Hong Kong's competitiveness, this share will be reduced to 20 percent of the GDP or below by 2006-07.

Leung also vowed to control the growth of government expenditure in money terms, in addition to controlling it in real terms.

The government has operating deficits for four consecutive years since 1998-99 and in three of the past five years, the Consolidated Account has also recorded a deficit.

Leung said he aimed to achieve consolidated and operating balances by 2006-07.

Questions?Comments? Click here