ENG-1970 — Page 54

FINANCIAL STRUCTURE

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the Plover Cove Reservoir scheme and certain major land develop- ments, neared completion. There was also a fall in construction costs due largely to reduced private development.

The picture changed again in 1968 when, partly as an aftermath of success in surmounting the political difficulties of 1967, partly under the influence of world inflation on demand for Hong Kong exports, another period of unusually rapid growth began, causing the growth of revenues at existing tax rates once again to out- distance the substantial rate of growth of expenditure on special services and development. A budget forecast of a surplus of $13 million in 1968-9 became an actual surplus of $208 million. The pace of economic growth continued to accelerate in 1969-70 and an estimated surplus of $53 million became an actual surplus of $449 million.

For 1970-1 the budget estimate of revenue is $2,584 million which is $147 million more than actual revenue in 1969-70; there were only a few minor tax changes. The estimate of expenditure is $2,393 million which is $305 million more than in 1969-70. The estimated surplus of $191 million is, however, likely to be exceeded in the event. Apart from continued economic growth, a new factor during this year has been a revival of interest in sales of Crown Land and a record revenue yield from this source is expected. Much of this derives from land development schemes which have been carried out in recent years in anticipation of demand. The recovery of private development, however, is having the effect of raising the cost of public works substantially. The consequence of these factors during 1970-1 is likely to be a substantial overall fiscal surplus, although the increase in current expenditure will probably more than keep pace with the increase in recurrent

revenue.

At March 31, 1970, net available public financial assets were $1,564 million, of which $138 million was earmarked in the Revenue Equalisation Fund as a reserve against possible future deficits on current account. In accordance with normal government practice, the public debt of the Colony (see Appendix 10) is not included in the statement of assets and liabilities at Appendix 8. The debt at March 31, 1970 was $63.3 million or the equivalent of approx- imately $16 per head of population. Indebtedness decreased by