Shortfall from MTR share offer and stock market fluctuations blamed for Budget pessimism

Officials are pessimistic about the chances of the $6.2 billion budget deficit forecast for this year turning into a surplus.

In previous years the forecast deficit has usually turned out to be a surplus, but Secretary for Treasury Denise Yue Chung-yee said yesterday a shortfall in investment returns and revenues from the MTR share offer had dampened her hopes.

Her comments followed a challenge by lawmakers to official plans to raise certain basic government fees despite a staggering $444 billion in reserves. The Government projected a $36.5 billion deficit in 1999-2000 but ended up with a $10 billion surplus due to a windfall of $27.9 billion in revenue and under-spending of $18.6 billion.

Ms Yue, explaining the Policy Address in Legco, said the $6.2 billion deficit forecast for 2000-01 was based on the assumption that the privatisation of the Mass Transit Railway Corporation would fetch $15 billion in the financial year. But she said proceeds were $5 billion short after this month's public offer.

Investment returns might also be lower than projected if the stock market continued to fluctuate as it had in recent weeks, she said.

She stopped short of disclosing the estimated rate of return, but said one percentage point short of the target would cost taxpayers $4 billion. 'I'm not a prophet and I can't guarantee if there will still be a deficit of $6.2 billion when the financial year ends in March,' she said. 'But I don't see any reasons to make me confident . . .'