The Minister of Finance managed to post a budget deficit of 4.3% of GDP for 2006/07 which, surprisingly, is lower than the target of 5.3% announced last year. Government now aims at containing the budget deficit further to 3.8% for 2007/08.
The Minister has remained disciplined in limiting expenditure growth by keeping expansion of expenses below 10%. Further analysis shows good fiscal practices with capital expenditure growing by 24.1% while recurrent expenditure increases by a mere 6.8%.
Despite the lowering of the tax rates, budget revenue is projected to increase by 19.6% in 2007/08 to amount to Rs.61.7 billion. In fact, recurrent revenue, which includes receipts from direct taxation, increases by 13.5% while capital revenue rises by 43.9%. This is due to an inflow of foreign grants totalling Rs 2.9 billion.
Moreover, by abolishing the Consolidated Sinking Fund and including the debt of parastatals and other public sector bodies within public debt, public debt management will be considerably improved and greater transparency will be insured within public finance.
