E. Sharing Responsibility to Tackle the Deficit

40. The fiscal deficit is the result of a combination of economic problems. It has reached a critical stage. If not tackled immediately, it will become an insurmountable obstacle to our efforts to ride out the current economic difficulties. Therefore, solving the deficit problem is Government's top priority.

I. Aggravating the Deficit

41. The imbalance in the public accounts has worsened drastically in recent years. A consolidated deficit of more than $60 billion was recorded in 2001-2002, which was much higher than the previous year. Although our overall real economic performance improved slightly in 2002, our GDP in current dollar terms registered negative growth after taking into account the effects of continued deflation. The causes of our fiscal imbalance remain. They include increases in welfare spending because of the economic downturn, the drop in revenue from land sales and related sources, the decline in tax revenues and the postponement of the second offering of Mass Transit Railway Corporation shares. As a result, the fiscal deficit for the first eight months of 2002-2003 amounted to $70.8 billion. We estimate that when the current financial year closes at the end of March, the deficit will hit a record high of over $70 billion, representing more than 5% of GDP.