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HONG KONG, Apr 29 (Reuters) Hong Kong posted a provisional HK$13.96 billion (US$1.79 billion) fiscal surplus on its consolidated account for the year ended March 2006, data on Saturday showed.

The improved finances reflect government expenditure cuts and increased revenue as an economic recovery has boosted tax income and kick-started public land sales.

Hong Kong's economy was one of Asia's best performers last year, expanding 7.3 percent, and is poised to grow by another 5 percent this year, economists say.

Still, government finances remain vulnerable during economic downturns as more than 40 percent of wage earners pay no income tax. This summer the government plans to launch a public consultation on a possible goods and services tax to make revenue more stable.

The consolidated surplus of HK$13.96 billion was well below a HK$21.4 billion surplus in fiscal 2004/05 when government revenues were inflated by HK$26 billion raised from securitised notes and bonds -- debt that eventually must be repaid.

Financial Secretary Henry Tang in his budget had forecast a HK$4.1 billion consolidated surplus for 2005/06.

Government expenditure in 2005/06 totalled HK$233.07 billion versus revenue of HK$247.03 billion, the data showed.

For March alone, the government posted a HK$1.93 billion surplus as expenditure totalled HK$22.93 billion and revenue amounted to HK$24.86 billion.

Fiscal reserves stood at HK$310.7 billion at the end of March, up from HK$308 billion at the end of February.

(US$=HK$7.8) REUTERS PV HT1207