The government hopes to present the 2010 budget later this year with a deficit forecast of almost 8 percent of GDP while the provisional budget deficit for 2009 is over ten percent but prospects for 2010 look bright.

The economy is expected to do well after a 30-year war came to an end last May, with the global economy showing signs of recovery and the government planning to rationalise expenditure and put into force recommendations made by a presidential taxation commission.

The actual budget deficit for 2009 is estimated at 10.22 percent of GDP, according to the Pre-election Budgetary Position Report recently published by the Treasury, as revenue decreased by 3.2 percent from estimates of the revised 2009 budget and recurrent and capital expenditure increased by 6.6 percent and 19.3 percent respectively.

The Treasury said the budget deficit expansion was caused by high interest payments, speedy implementation of infrastructure development programmes, spending on post-war rehabilitation of the North and East and welfare spending on IDPs.

It said revenues took a hit as economic activity was lower than expected because of the global financial crisis, with much of the expected tax revenues not materialising.

The Treasury said the budget outlook for 2010 looks very positive with most of the ‘one-off’ effects reflected in 2009 being absent. The recommendations of the taxation commission are also expected to help in increasing tax revenue.

The Treasury has submitted a summery of fiscal operations for 2010 with revenue estimated at Rs. 824.6 billion and total expenditure at Rs. 1,262.5 billion with the Rs. 437.9 billion budget deficit estimated at 7.9 percent of GDP.

A vote on account was passed in parliament last year for the first four months of this year until the next parliament sits and the 2010 budget is presented.

*GDP figures calculated by using Treasury data. The 2009 budget deficit is estimated at 9.7 percent of GDP, the deficit amounting to Rs. 469.6 billion. Therefore GDP = (469.6/9.7) x100 = Rs. 4,841.2 billion. Similarly, GDP for 2010 was calculated where 2010 GDP= (414.7/7.5)x100= Rs. 5,529.3 billion.