17 - 23 May 2001

Fiscal deficit at 6% of GDP

Fiscal deficit at the end of 2000 was provisionally estimated to be Lm95m or six per cent of GDP, implying a larger improvement than originally anticipated as higher revenues outpaced expenditure growth.
In its March 2001 quarterly review, the Central Bank said that revenue for the fourth quarter of 2000 was estimated at close to Lm154m, Lm15.m more than in the same quarter of 1999. Income tax and social security contributions were expected to yield Lm45.5m and Lm35.4m, up by 20 per cent and 11 per cent respectively.
This mainly reflects the upward revision in the income tax bands and the drive towards greater efficiency in the tax collection process, together with a higher national insurance contribution rates introduced from the beginning of the year.
Revenue from indirect taxes was expected to rise to Lm60.1m in the last quarter of the year, with the increase being entirely generated by Value Added Tax.
The increase in overall expenditure on the other hand was due to a rise in recurrent expenditure which was offset by a drop in capital expenditure.
Recurrent expenditure was projected to have increased by almost nine per cent due to higher outlays on retirement pensions. Interest payable remained largely unchanged while capital expenditure was projected to have declined by Lm2.7m.
The Central Bank said the government relied heavily on Treasury bills to finance its deficit. In the final quarter of the year, government also drew down Lm15.3m from its deposits with the banking system.
Treasury bills in issue at the end of the fourth quarter totalled Lm173m, up by Lm28m from the third quarter’s level.
Compared to the 1999 closing position, the amount of Treasury bills in issue at the end of the year was up by Lm89.7m.
Furthermore, between October and December of 2000, repayments of foreign loans were expected to amount to Lm3.2m.
By the end of 2000, the Gross Public Debt stood at Lm825m, up by Lm85m from the end-1999 level and equivalent to 60 per cent of GDP.
The greater part of the debt was financed from local sources, with foreign borrowing providing only Lm39.3m or 4.2 per cent of total financing.