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"As we enter the run-up to the transition, I am able to report that our financial position is very strong.
"Our fiscal reserves are buoyant. We will start life as a Special Administrative Region in an extremely favourable position."
On the expenditure side, he said, there was an underspending of $5.5 billion from the Capital Works Reserve Fund.
"We missed our expenditure targets for capital works projects by $2 billion; for purchase of premises by $2 billion; and for land acquisition by $1.5 billion," said Mr Tsang.
On the revenue side, said Mr Tsang, there were increases in both recurrent and capital revenues for two main reasons:
Firstly, the recurrent receipts are forecast to be $5.8 billion higher than originally estimated. A sharp rise in activity in both the property and stock markets led to a surge in receipts from stamp duty in the second half of the year; and
Secondly, land revenue is likely to be $1 billion higher than originally forecast. Enthusiasm among developers has risen recently. They are now showing considerable eagerness to finalise premium payments for the redevelopment of sites.
"While additional revenue is always welcome, these increases come from two particularly volatile sources. It would not be wise for me to anticipate that this boost to our finances would be maintained over the medium term," said Mr Tsang.
In drawing up this year's programme of expenditure, Mr Tsang said, the budgetary guideline that government expenditure should grow at a rate no faster than the economy had been followed.
"When account is taken of all additional spending initiatives to be introduced in 1997/98, I estimate that government expenditure (excluding payments from the Capital Investment Fund) will tota! $202.2 billion. This is an increase of $24.5 billion over the revised estimate for 1996/97.
"After adding forecast payments from the Capital Investment Fund of $0.8 billion, total expenditure will amount to $203 billion," he said.
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