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Deficit forecast
The Government is now forecasting a deficit for the current year of $2.5 billion. This is virtually the same as the deficit it originally estimated, the Financial Secretary, Mr Donald Tsang said.
In overall terms, this outcome has arisen because a reduction in revenue of $8.2 billion has been offset by an underspending of $8.3 billion.
However, the original estimates for both revenue and expenditure included the Post Office and the Office of the Telecommunications Authority.
During the year, these became trading funds.
"As a result, we have to account for their revenues and expenditures in the books of the new Trading Funds rather than, as previously, in the General Revenue Account," Mr Tsang said.
After eliminating the effect of this accounting change, revenue for the year is $6.4 billion less than originally estimated. while underspending amounts to $6.6 billion.
On the expenditure side, there are two main reasons for the underspending.
First, there has been underspending of $4.5 billion from the Capital Works Reserve Fund. This is a result of reduced expenditure on land acquisition of $ 1.5 billion and a slippage in capital works of $3.0 billion.
Second, there has also been underspending of $1.8 billion from the Loan Fund. This arises as a result of the payment of loans to the Housing Society being made in March 1995 rather than in the current financial year as anticipated when preparing the original estimates.
The underspending of $4.5 billion in the Capital Works Reserve Fund amounts to 12 per cent of the original estimate. This is the third year in which underspending has been reduced from the high levels of over 30 per cent experienced in both 1991-92 and 1992-93.
On the revenue side, the Government has seen a shortfall in both capital and recurrent revenues as a result of two main factors: