The Budget Deficit for 2007/08 is projected to be around 3.8% of GDP, as announced in last year’s budget. This, however, reflects both a public spending overshoot (by Rs.2.9 billion) and an above than expected revenue level (by Rs.1.7 billion). It should be noted that tax for 2007/08 yielded Rs.3.8 billion revenue higher than projected while grants from the European Union were much lower than hoped for.
For 2008/09, total government expenditure of Rs.63.5 billion against revenue and grants of Rs.61.6 billion and a resultant budget deficit of Rs.9.3 billion, representing a budget deficit of 3.3% of GDP is, in conventional economic terms mildly expansionary. The Minister has managed to post a lower budget deficit as a percentage of GDP for four consecutive years and this despite the increased pressures on expenditure, mainly the result of the forthcoming PRB implementation. It should be pointed out that government expenditure should register a 15% increase for 2008/09 while growth of expenditure has been kept at around 5% for the last three years. In fact, higher revenues from taxes and grants have provided the Minister with greater flexibility on spending while keeping the budget deficit at a sustainable level.
Total public debt, consisting of internal and external public debt, has increased to Rs.146 billion in 2007/08 from Rs.138 billion in 2006/07, registering a fair 6% progression.
The introduction of Programme Based Budgeting is highly welcomed and should help contain future spending by tying permitted expenditure to specific targets. This has been successfully applied throughout the world for the past decade and has greatly helped in managing government expenditure. One of the key elements for success is, however, the development and implementation of performance measures, which need to be practical, realistic and meaningful. Without good performance measures, Programme Based Budgeting will be unable to attain its set objectives.
