Bid to curb deficit

PUBLISHED : Tuesday, 16 March, 1993, 12:00am
UPDATED : Tuesday, 16 March, 1993, 12:00am

FINANCE Minister Mr Liu Zhongli is to call upon government units and enterprises to improve efficiency and exercise discipline to bring down the nation's massive budget deficit.

Presenting his first budget to the National People's Congress this morning, Mr Liu also will make clear that because of monetary constraints, ''priority areas'' including agriculture and education will see only moderate increases in expenditure.

Mr Liu, who took over as Finance Minister from Mr Wang Bingqian last year, has made provisions for expenditure of 472.74 billion yuan (HK$636.78 billion) this year, and income of 452.24 billion yuan.

This yields a deficit of 20.5 billion yuan, or slightly lower than the record 23.75 billion yuan incurred last year.

Mr Liu describes the fiscal situation as ''very difficult'', hinting that except for the rich zones along the southeast coast, belt-tightening has hit the entire nation.

''Not only is the financial situation of the central government difficult, the same is true for localities,'' he says in his speech to the congress, copies of which were released to deputies last night.

''The financial state in some counties is particularly serious, to the point that many places have difficulties meeting payrolls.'' To remedy the situation, Mr Liu recommends that government units and enterprises cut excessive and unnecessary spending and that they improve efficiency.

However, perhaps in deference to patriarch Mr Deng Xiaoping's recent dictum that regions that have the requisite conditions may aim for a higher growth rate, the Finance Minister has not openly cracked the whip on excessive capital construction by local governments.

Mr Liu has trained his firepower on state enterprises continuing to pile up losses.

He also calls attention to malpractices involved in government departments setting up businesses on the side.

Mr Liu says that the losses incurred by industrial enterprises this year must be cut by five per cent and that ''management-related losses'' must be slashed by 15 to 20 per cent.

Mr Liu has budgeted a mere 8.73 billion yuan for government subventions for state business units this year, down from 22.16 billion yuan spent for propping up losing enterprises last year.

Cases of evasion of taxes - as well as the diversion of taxes away from central coffers - also have increased.

The Finance Minister discloses that certain regional administrations have taken upon themselves to lessen the taxes imposed on local enterprises, thus hurting the income of central coffers.

Moreover, despite the strides apparently made in price reform, state subsidies for prices are projected at 37.26 billion yuan this year, even more than the mammoth 32.15 billion yuan in 1992.

As a result of dire fiscal straits, increase in expenditure in a number of ''priority'' areas has been modest at best.

For example, 29.19 billion yuan out of the total agriculture budget of 41.93 billion yuan will be earmarked for aiding agriculture production.

This amounts to a mere 9.3 per cent over that of 1992, hardly an improvement when inflation is taken into account.

Spending for education and science and technology is 49.41 billion yuan and 6.35 billion yuan respectively, a rise of 9.8 per cent and 10.8 per cent respectively over last year.

By contrast, the People's Liberation Army will get a record allocation of 42.5 billion yuan for 1993.

Since army expenditure in 1992 was 37.78 billion yuan, which was slightly over the original estimate, the actual increase in the defence budget comes up to 12.5 per cent.

Unlike the Government Work Report by the Prime Minister, budget forecasts are seldom amended by the congress.