ENG-1994 — Page 97

THE ECONOMY

Declaration. The income of the fund is derived mainly from land premia and appropriations from the General Revenue Account.

The Capital Investment Fund finances the government's capital investments (mainly in statutory public bodies), such as equity injections in the Mass Transit Railway Corporation, capital investments in the Hong Kong Housing Authority and advances to the Provisional Airport Authority. Its income is derived mainly from dividends and interest on investments and appropriations from the General Revenue Account.

The Disaster Relief Fund was set up in December 1993 and finances grants for humanitarian aid in the event of disasters that occur outside Hong Kong. Its income is derived mainly from appropriations from the General Revenue Account.

The Loan Fund finances government loan schemes such as housing loans and student loans. Its income is derived mainly from loan repayments, interest on loans and appropria- tions from the General Revenue Account.

The Lotteries Fund finances social welfare services through grants and loans. Its regular source of income is derived mainly from the sharing of the proceeds of the popular 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 provides a model for the con- solidated 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 ex- penditure is that the growth rate of public expenditure should, over a period, be close to that of the 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 Expenditure

Public expenditure in 1993-94 totalled $155.2 billion. The government itself accounted for $134 billion, excluding equity injections to the Sewage Services Trading Fund, the Provisional Airport Authority and other bodies. The growth rate over the preceding year was 25.7 per cent in nominal terms or 15.2 per cent in real terms, largely as a result of a number of special non-recurrent items implemented in 1993-94 to compensate for underspending on capital projects in the previous two years. Some $46.2 billion, or 29.8 per cent of the public expenditure in 1993–94, was of a capital nature. An analysis of expenditure by function is at Appendix 7.

Public expenditure has remained comfortably below 20 per cent of the gross domestic product for the last decade. The growth rate of public expenditure is compared with the rate of economic growth at Appendix 9.

Total government revenue in 1993–94 amounted to $166.6 billion. The consolidated cash surplus, after the repayment of $1.2 billion for bond redemption, was $19.2 billion. Details of revenue by source and of expenditure by component for 1993-94 and 1994–95 (estimated) are at Appendix 10.

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