The operating deficit of the Hong Kong Special Administrative Region (HKSAR) government for 2004-05 is forecast to be 14.1 billion Hong Kong dollars (1.81 billion US dollars), much lower than the 46.6 billion Hong Kong dollars originally estimated, said Hong Kong's Financial Secretary Henry Tang on Wednesday.

When presenting the 2005-2006 government budget to the Legislative Council, Tang said that operating expenditure for 2004-05 will be lower than that for 2003-04. Barring two special accounting arrangements with the former municipal councils, this is the first time in over 50 years that operating expenditure has fallen.

This demonstrates that the various control measures taken by the HKSAR government are gradually producing results. These include reduction in the civil service establishment, adjustments to civil service pay, reprioritization of service provision, structural reorganization and streamlining of procedures, Tang said.

As Hong Kong's economy put in a strong performance in 2004, revenue from various sources was higher than expected, Tang said.

For the consolidated account, a surplus of 12 billion Hong Kong dollars is expected for 2004-05, equivalent to 0.9 percent of Hong Kong's Gross Domestic Product (GDP). This is the first time since 1999-2000 that the consolidated account has recorded a surplus, and this is mainly due to lower-than-expected expenditure and higher-than-expected revenue this year, said Tang.

He added that the main reason for the surplus is that revenue from land premiums is far greater than expected.