5.
So we have done well on the expenditure side
this year and the unexpected revenue flush has had a very useful anti-inflationary impact: the G.D.P. deflator will be, at 3% only, much less than the budget forecast of 7%
and the average level of the C.P.I., for 1977 over 1976, will be no more than the budget forecast of 6%, despite
the fact that the economy's growth momentum has been due to the strength of domestic sector activity.
Fiscal Reserves
6.
stand at:
Our fiscal reserves at 1st April 1978 should
$mn
General Revenue
Balance at 31st March 1977
3,713
Add: estimate of surplus in
1977-78 and draw down of
$27 million from US$ loan
facility
1,102
4,815
million as cover for our
We must allow, say, $3,200 contingent liabilities (which will rise to $9,500 million by 31st March 1982, the last year of the new forecast period, thanks to the Tsuen Wan Extension of the M.T.R. and the Home Ownership Scheme (and, if total M.T.R.C. liabilities are taken to be our effective liability, then
this figure rises to about $12,500 million). Thus we shall have free reserves of $1,615 million to finance our
seasonal deficits on General Account and any short term difficulties. Expenditure next year will be of the order of $10,266 million (c.f., as a matter of interest, expenditure in your first full year here as Governor, namely, 1972-73, of $3,800 million). Thus, at 15.7%, our position will be a little better than the guideline which "requires" us to maintain free reserves at the beginning of a financial year equivalent to 15% of estimated
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