Financial Secretary Antony Leung is confident Hong Kong will meet its fiscal targets for 2006-07, despite pledging almost $12 billion to counter the economic effects of atypical pneumonia.

Briefing the media this afternoon, Mr Leung also said the Budget, the peg to the US dollar, and Mandatory Provident Fund contributions will remain unaffected by today's proposals which he described as a "one-off measure to tackle a one-off problem".

Chief Executive Tung Chee Hwa announced earlier in the day a package of economic-relief measures worth about $11.8 billion to relieve the short-term difficulties of sectors hardest hit by the outbreak. They included the suspension of Government charges, tax rebates and other concessions.

Mr Leung assured that they were short-term measures to provide relief for the economic pain caused by the virus, emphasising that the Government's drive to solve the fiscal deficit, as set out in the Budget, remains unchanged as it is a medium-term objective.

"The Budget represents a good set of measures that will solve the [fiscal deficit] problem over the medium term. So what we have are two sets of proposals; one set addressing the [fiscal] problem, another set represents the one-off measures to counter what I hope will be a one off situation [with atypical pneumonia]," Mr Leung said.

"Will not revise the Budget. The proposals we set out in March are to address the budget over the medium term. However, with atypical pneumonia we need to react, and the reaction is the set of one-off measures we have proposed to address this one-off problem.

"And we have to balance the two. Whatever we do should be affordable to Hong Kong and not disrupt financial stability, hence a dedicated balancing act is needed to achieve this objective. The money will come from our fiscal reserves. If we take these measures, and the measures to contain the spreading of the disease, hopefully the economy will go back to a growth path."

He said the budget deficit will be higher this year, but until the virus is controlled it is too early to predict with accuracy what the economic costs will be. However, he expects the budget deficit to eventually shrink under the measures which he says most legislators support.

"This year the budget deficit will be larger than the original estimate. Next year it may be slightly larger depending on the growth rate. But thereafter, with the measures and economic growth, I am quite certain the budget deficit will be contained," he said.

"Whether we will achieve the numbers set out in March is obviously difficult to assess, but I don't think it will be a disastrous scenario. With the measures we have proposed and if they are supported, I am quite confident the budget deficit will continue to shrink, at least by 2006-07 it will be down to a level which is very comfortable, unlike what we have today which is 5% of GDP."

Mr Leung said he was confident the public would back the measures.

"We can afford the size of the package proposed as we are sitting on a very healthy fiscal reserve. So I hope [people] can see the package proposed is balanced and affordable for Hong Kong," he said.

The 2002-03 fiscal reserve is estimated to be about $303 billion.

"The one-off measures will have an impact this year but will not affect the trajectory of our revenue and expenditure growth in subsequent years. But if we just think back to the Asian financial crisis in 1998, we made adjustments to the tax base [but] the magnitude of that single measure alone exceeds the magnitude of the proposals we have made today."