7
Affordability to the Government
14.
Government
affordable.
In planning the
implementation
of the ACP, the
is obviously insistent that it should be
Accordingly, a long-term projection of the
Government's financial position has been undertaken on the
basis of the preliminary financing strategy for the ACP as
described above. For financial prudence, the projection has been tested against various possible adverse deviations such
as lower trend growth rate of the economy, reduced revenue, price escalation and increased cost of the ACP. The results
show that there would be a few years of deficit budgetting but that by 1996 at the latest, the annual Government budget would be back in surplus. More importantly, the forecast shows that after meeting projected deficits, the level of fiscal reserves
(excluding the reserves in the Land Fund and assuming no Government borrowing) would still be maintained at a prudent level throughout the period up to 1997.
15.
The projection also
shows
that the starting financial position of the Hong Kong Special Administrative Region Government (SARG) would be very strong, for it will not only inherit the fiscal reserves and the accumulations in the
Land Fund, but also derive considerable additional revenue
when the ACP is completed. For example, there will be substantial revenue from the sale of land generated by the Western Kowloon Reclamation and by the North Lantau development, as well as the redevelopment of East Kowloon upon closure of Kai Tak airport. In addition, the Government will receive significant revenue from the Lantau Fixed Crossing either in the form of tolls or a lump sum from the sale of an operational franchise. As the sole shareholder of the MTRC
and the AA, the Government will also receive dividends from these bodies, as their financial position permits.