ENG-1990 — Page 88

THE ECONOMY

64

in the Mass Transit Railway Corporation and capital investment in the Hong Kong Housing Authority. Its income is derived mainly from interest and dividends on in- vestments, disposal of investments, repayments of loans, and transfers from the General Revenue Account.

The Loan Fund is used to finance schemes of government loans such as student loans and housing loans. Transfers are made from the General Revenue Account to enable the fund to meet its commitments. The other main sources of income are interest and dividends on loans and investments and loan repayments.

The Lotteries Fund is used to finance development of social welfare services through loans and grants. Its income is mainly from a share of the proceeds of 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 models 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 public expenditure is that the growth rate of public sector expenditure should over a period be close to that of gross domestic product.

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 these principles and to longer-term trends in the economy.

Public Sector Expenditure

Consolidated public sector expenditure in 1989–90 was $81.9 billion. The government itself accounted for $67.8 billion excluding grants to the two municipal councils, equity injections in the Mass Transit Railway Corporation and the Housing Authority, and debt repayments. The growth rate of consolidated public sector expenditure over the preceding year was 26.5 per cent in nominal terms or 10.8 per cent in real terms. Some $25.9 billion or 31.6 per cent of the consolidated public sector expenditure in 1989–90 was of a capital nature. An analysis of expenditure by function is at Appendix 8.

The growth rate of consolidated public sector expenditure is compared with the rate of economic growth at Appendix 9. Consolidated public sector expenditure has been around 15 to 16 per cent of the gross domestic product since 1985-6.

Total government revenue in 1989-90 was $82.4 billion. The consolidated surplus of $11.1 billion, comprised $4.7 billion on the General Revenue Account and $6.4 billion in the other funds. Details of revenue by source and of expenditure by component for 1989-90 and the original estimates for 1990-91 are at Appendix 10.

The draft Estimates of Expenditure on the General Revenue Account are presented by the Financial Secretary to the Legislative Council when he delivers his annual Budget Speech. In the Appropriation Bill introduced into the Legislative Council at the same time, the administration seeks appropriation of the total estimated expenditure on the General Revenue Account.

The Estimates of Expenditure contain details of the estimated recurrent and capital expenditures of all government departments, including estimates of payments to be made to subvented organisations and estimates of transfers to be made to the statutory funds. They also provide for the repayment of public debt.