Public Finance
210. The Government has been adhering to the principle of keeping the expenditure within the limits of revenues as enshrined under Article 107 of the Basic Law and strives to achieve fiscal balance over a period of time to ensure the resilience and sustainability of our public finances.
211. Let me elaborate on the Government's current fiscal position.
212. Government revenue and expenditure are broadly presented in two major accounts, namely the Operating Account and the Capital Account. The revenue of the Operating Account mainly comes from various types of tax revenue, investment income, government fees and charges, and so on, while its expenditure is largely attributed to the Government's daily expenses. As for the Capital Account, its revenue is mainly land-related, while its expenditure largely involves infrastructure works projects and land acquisition.
213. In view of the different composition and nature of the Operating Account and the Capital Account, we have to manage them separately with different fiscal targets and methods. The Operating Account should be managed on the basis of keeping expenditure within the limits of revenues with the target of achieving a surplus.
214. As for the Capital Account, expenditure on infrastructure works is our investment for the future. For instance, the NM development, which will bring economic and social benefits upon completion, has to be taken forward to meet the needs for social and economic development. However, as revenue is susceptible to economic cycles, there may be a shortfall between revenue and expenditure. Under such circumstances, we can utilise the surplus in the Operating Account or our fiscal reserves as support, or make flexible use of market resources, including various forms of public‑private partnership and bond issuance.
215. We forecast that the Operating Account will largely achieve balance in 2025‑26 and return to a surplus starting from 2026‑27. The Capital Account is estimated to record a deficit in the Medium Range Forecast (MRF) period due to the accelerated development of the NM and other public works projects relating to the economy and people's livelihood. Nevertheless, the level of deficit will decline year‑on‑year from 2026‑27 onwards.
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