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Finance Ministry leaves 2007 deficit unchanged

The Finance Ministry will not change its accrual-based general deficit target for 2007, in spite of expecting to close 2006 with a smaller-than-targeted deficit, Finance Minister János Veres said on Tuesday.

Veres said he saw no reason now to change the target, but the ministry could reconsider the question after April 2007. The minister said that the accrual-based deficit in 2006 would be under 10%, compared to the earlier target of 10.1%. Residual revenue at budget-funded institutions are expected to reach Ft 350 billion at the end of 2006, down from Ft 520 billion at the end of 2005. Veres said Ft 3 billion paid back into the budget by the Ministry of Defense would be used to cover additional costs incurred by the police forces during the year as well as the cost of renovating the presidential palace. The Finance Ministry forecasts a Ft 340 billion cash flow-based general government deficit for December, resulting in a year-end figure of Ft 2,041 billion or 8.8% of the projected GDP, the ministry announced on its web site on Tuesday.

The forecast is some Ft 15 billion down from the preceding year-end forecast one month earlier. The general government deficit was Ft 1,701.1 billion in January-November, equivalent to 7.31% of projected GDP. The deficit stood at 82.7% of the modified full-year target, meaning the December deficit must not exceed Ft 355.3 billion if the modified full-year target of Ft 2,056.4 billion is to be met. The December forecast shows a Ft 490 billion deficit in the central budget, a Ft 169 billion surplus in the social insurance funds and a Ft 19 billion deficit in separate state funds. The forecast includes a Ft 207 billion transfer from the central budget into the social insurance funds in December. The Finance Ministry expects this year's cash flow-based deficit to reach 9.5% of GDP, including a 0.7%-of-GDP deficit of local councils.

The deficit includes motorway construction debts equivalent to 1.8% of GDP taken over by the central budget. The Finance Ministry earlier planned to take over Ft 352 billion of debt from the National Motorway Company (NA). Now, better than expected fiscal developments allow the budget to take over a further Ft 63 billion of the company's debts as well as its interest obligations. The decision will reduce next year's Ft 146 billion target for taking over debts. In its new projection, the ministry targets budget revenue of Ft 6,481.8 billion in 2006, Ft 45.3 billion more than in the forecast in the previous month. The expenditure forecast, however, has also been raised, by Ft 53 billion to Ft 8,438.6 billion. More than half of the increase in revenue - Ft 24 billion - is expected to come from consumption-related tax revenue. On the expenditure side, spending on budget-funded institutions is up Ft 16 billion from the previous forecast and interest payments are Ft 14 billion higher than earlier projected. Support for local councils, however, is Ft 13 billion less than in last month's projection. The Ft 62 billion raise in central budget expenditures is unspecified under the item „others”, but it obviously relates to taking over debts. (Mti-Eco)