XN000022-1992-03-04 — Page 11

WEDNESDAY, MARCH 4, 1992

IN SETTING ABOUT FINANCIAL MANAGEMENT, THE FINANCIAL SAID HE HAD BEEN DETERMINED :

* TO ENSURE THAT PUBLIC SPENDING

ECONOMIC GROWTH:

*

*

SECRETARY

REMAINED IN LINE WITH

ΤΟ RAISE SUFFICIENT REVENUE TO COVER THE GOVERNMENT'S SPENDING COMMITMENTS, AND TO ENSURE THAT AT LEAST HALF THE COSTS OF THE CAPITAL EXPENDITURE WAS FINANCED BY RECURRENT REVENUE; AND

TO MAINTAIN RESERVES AT THE LEVEL ADEQUATE BOTH ΤΟ MEET KNOWN COMMITMENTS AND TO PROVIDE A CUSHION AGAINST FUTURE

UNCERTAINTIES.

HE SAID THIS LAST GUIDELINE TOOK INTO ACCOUNT THE NEED UNDER THE MEMORANDUM OF UNDERSTANDING ON THE AIRPORT CORE PROGRAMME BOTH TO COMPLETE THE AIRPORT CORE PROJECTS BY MID-1997 TO THE MAXIMUM EXTENT POSSIBLE, AND TO PLAN THE GOVERNMENT'S FINANCES WITH THE FIRM OBJECTIVE THAT THE FUTURE GOVERNMENT OF THE SPECIAL ADMINISTRATIVE REGION INHERITED FISCAL RESERVES OF AT LEAST $25 BILLION.

MR MACLEOD SAID THIS LATTER COMMITMENT WAS ENTIRELY COMPATIBLE WITH THE GOVERNMENT'S TRADITIONAL FINANCIAL POLICY AND BUDGET PLANNING WHICH SOUGHT TO ENSURE ADEQUATE RESERVES.

"THE GUIDELINES I HAVE ADOPTED REPRESENT SOUND SENSE AND ARE THOSE WHICH HONG KONG MUST FOLLOW IN THE FUTURE, AS IN THE PAST, THE FINANCIAL SECRETARY SAID,

"IN APPLYING MY GUIDELINES, I HAVE OF COURSE LOOKED BEYOND THE IMMEDIATE REQUIREMENTS FOR THE COMING YEAR. WE PREPARE A MEDIUM RANGR FORECAST WHICH NORMALLY COVERS THE CURRENT FINANCIAL YEAR, THE ESTIMATE YEAR AND THREE YEARS BEYOND THAT.

"THE LASTEST MEDIUM RANGE FORECAST GOES FURTHER AND INCLUDES 1996-97. I JUDGED IT SENSIBLE THIS YEAR TO EXTEND THE FORECAST PERIOD BY ONE YEAR IN ORDER TO SHOW THE POSITION UP TO THE LAST FULL YEAR BEFORE THE CHANGE OF SOVEREIGNTY," MR MACLEOD SAID.

HE SAID THIS FORECASTING PROCEDURE WAS A VITAL AND EFFECTIVE TOOL OF FINANCIAL MANAGEMENT. IT INVOLVES A THREE-STAGE PROCESS:-

THIS

"FIRST, WE FORECAST THE TREND RATE OF ECONOMIC GROWTH. GIVES US THE MAXIMUM SAFE CEILING FOR THE GROWTH IN PUBLIC EXPENDITURE.

"SECOND, WE FORECAST THE BASIC SPENDING PRESSURES: THE Level of EXPENDITURE GROWTH NECESSARY TO MAINTAIN EXISTING SERVICES, TO MEET EXPECTED INCREASES IN DEMAND, TO COVER THE RECURRENT IMPLICATIONS

OF NEW CAPITAL PROJECTS DUE TO COME ON STREAM IN THE FORECAST PERIOD, AND TO COVER MAJOR NEW COMMITMENTS MADE IN PREVIOUS YEARS.

"THIRD, THE GAP BETWEEN THE EXPENDITURE CEILING AND THE EXPENDITURE FORECAST DEFINES THE SCOPE FOR FUNDING NEW COMMITMENTS, PROVIDED THAT SUFFICIENT FUNDS ARE AVAILABLE."

/IN PLANNING