Macleod says SAR funds to hit $361b
HONG KONG'S fiscal reserves are set to reach a massive $151 billion three months before the 1997 changeover - up by $31 billion from last year's estimates.
Taking into account the projected surplus of $33 billion and the Special Administrative Region (SAR) Land Fund, the retiring Financial Secretary Sir Hamish Macleod declared in his swansong budget yesterday that the total reserves of the SAR would be $361 billion.
'This represents about 1.4 times total government expenditure forecast for 1998/99. I believe that this would be the highest ratio of reserves to spending achieved in the history of Hong Kong,' he said.
In addition to the upward adjustment of the reserves, Sir Hamish also revealed that there would be a surplus of $7.7 billion in the 1994-95 fiscal year - similar to last year's estimate.
This is despite earlier speculations that the surplus might drop because of the lacklustre property and stock market.
Although there will be a revised deficit of $2.6 billion in the next financial year when spending on Chek Lap Kok airport will peak, the territory will return to a surplus budget from 1997 onwards - one year earlier than previously forecast.
The estimated deficit to be covered by the reserves is also substantially lower than last year's estimate of $15.88 billion.
The Government last year estimated that the territory would head towards two deficit budgets beginning from the next financial year, with a total of more than $23 billion.
Sir Hamish said he did not rule out the possibility that the treasury would report another surplus next year because the estimated deficit of $2.6 billion was small, representing less than two per cent of the government spending.
'It's already a balanced budget. I don't think I and my successor will be embarrassed if we end up with another surplus,' he said.
He attributed the dramatic revision of the surplus in the years ahead to rising interest rates that added to the earnings generated by the territory's reserves.
Another big factor was the 'more realistic assessment' of the public works programme, which meant that much of the money allocated for work projects would only be used later.
Sir Hamish maintained that the impressive reserves would be a major confidence-booster to Hong Kong people and overseas investors, in the face of the additional uncertainty over the 1997 handover.
He added: ' I don't expect the SAR to go on a spending spree. They are bound by the Basic Law.' Sir Hamish, however, said it would be difficult to say at what level of reserves people in the territory and overseas would have confidence over the sovereignty changeover.
'It's fair to say that we have ensured that they [the SAR] have substantial reserves and room for manoeuvre . . . They have a luxury of choices,' he said.
But he warned that excessive spending would lead to inflation and that the administration would find it difficult to 'find the money every year for the recurrent spending'.