8
But a short-lived tendency for expenditure to exceed revenue or for revenue yields to fall below expectations is best dealt with by having available adequate fiscal reserves.
24.
So we need to define the relationship which our fiscal reserves should bear to General Revenue Account expenditure. After allowing for our contingent liabilities mainly outstanding guarantees on the basis of a gearing
of three, and having regard to the fact that we finance
our seasonal deficits by running down our Hong Kong dollar deposits and not with short term debt instruments, we reckon that our net fiscal reserves (net of cover for contingent
liabilities) at the beginning of a financial year should always be sufficient to finance 15% of estimated expenditure in that
year.
25.
an
admission
o per
д judgment
enors
It is possible to take a view of these two permissive guideline ratios before the annual budget is prepared in detail. This year, for the 1977-78 budget, I decided we should strive for a real growth rate of 15%, rather than 10%, to make up for the fact that we slowed the growth rate of public expenditure right down in 1975-76 so as to assist the economy's cost/price structure to adjust to a lower level and because we achieved only an 8% growth rate in 1976-77. I am confident we can breach the 10% guideline ratio without serious implications for the relative size of the public sector or without disregarding the value for money criterion. I decided also there was no need to augment cur fiscal reserves by deliberately budgetting for a surplus though, over time, as the expenditure side of the budget continues to grow the reserves will have to be augmented to maintain the 15% guideline ratio.
Conclusion
Before
26.
So, in rather bald terms, that is the framework within which Hong Kong's public finances are managed. any of you start questioning its intellectual validity or start recalling that the figures do not always work
But, out as forecast, I must take my leave of you. before doing so, may I, Mr. Chairman, wish the conference
all success.
Ducking
questions?