THE ECONOMY
The Capital Works Reserve Fund finances the public works programme, land acquisitions, capital subventions, major systems and
systems and equipment items, and computerisation. On May 27, 1985, when the Sino-British Joint Declaration on the Question of Hong Kong came into effect, the fund was restructured to enable the premium income from land transactions to be accounted for in accordance with the arrangements set out in Annex III to the Joint Declaration. The income of the fund is derived mainly from land premiums and appropriations from the General Revenue Account.
The Capital Investment Fund finances the government's capital investments (mainly in statutory public bodies), such as equity injections in the Airport Authority and the Mass Transit Railway Corporation, and capital investments in the Hong Kong Housing Authority. Its income is derived mainly from appropriations from the General Revenue Account and dividends.
The Civil Service Pension Reserve Fund acts as a reserve to meet payment of civil service pensions in the unlikely event that the government cannot meet such liabilities from the General Revenue Account. Its income is derived mainly from appropriations from the General Revenue Account and interest on investments.
The Disaster Relief Fund finances grants for humanitarian aid in the wake of disasters outside Hong Kong. Its income is derived mainly from appropriations from the General Revenue Account and interest on investments.
The Loan Fund finances schemes such as housing loans and student loans. Its income is derived mainly from appropriations from the General Revenue Account, loan repayments, and interest on loans.
The Lotteries Fund finances welfare services through grants and loans. Its income is derived mainly from the sharing of the proceeds of the popular Mark Six lotteries.
Management of the Budget
The government manages its finances against the background of a rolling five-year, medium-range forecast of expenditure and revenue. This provides a model for the consolidated financial position of the General Revenue Account and of all the funds except the Lotteries Fund.
The most important principle underlying the government's management of the public finance is that government expenditure, over time, should not grow faster than the economy as a whole. The Budget presented by the Financial Secretary to the Legislative Council each year is developed against the background of the medium- range forecast to ensure that full regard is given to this principle and to longer-term trends in the economy.
Public Expenditure
Public expenditure in 1995-96 totalled $191.3 billion. The government itself accounted for $161.6 billion, excluding equity injections to the Mass Transit Railway Corporation, the Airport Authority and other bodies. The growth rate over the preceding year was 15.3 per cent in nominal terms or 6.2 per cent in real terms. Some $52.6 billion, or 27.5 per cent of the public expenditure in 1995–96, was of a capital nature. An analysis of expenditure by function is at Appendix 9.
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