The Ministry of Finance issued a statement at the end of April outlining the main targets for the coming fiscal year. The budget statement did not provide a detailed breakdown for 2016/17, but it noted that expenditure would rise by 13%, compared with the expected actual outcome in the current fiscal year, and that revenue would rise by 20%. This resonates with earlier statements by Mr Muait, who said that spending would rise from an estimated E£828bn (US$93.6bn) to E£936bn, an increase of around 13%. The figure that he gave for 2015/16 spending is 4% lower than the £865bn in the original budget, which suggests that the ministry is expecting to make some modest spending reductions owing in part to the impact of lower oil prices on fuel subsidies.
On the revenue side, Mr Muait said that there would be only a modest increase of 1.4% to E£631bn from E£622bn, but the 2015/16 figure is the same as in the original budget. Assuming the 20% increase in revenue referred to in the budget statement, this implies that actual revenue in 2015/16 would be E£526bn, a considerable shortfall compared with the target.
The budget statement said that nominal GDP would rise to E£3.25trn in 2016/17, from an estimated E£2.77trn in the current year. Based on the ministry’s figures, the overall deficit would rise only slightly in cash terms to E£305bn in the 2016/17 budget from an expected deficit of E£302bn in the current year, although as a percentage of GDP the deficit would fall to 9.4% from 10.9%. According to the most recent actual figures issued by the ministry, the deficit in the first seven months of the current fiscal year was 6.8% of GDP, compared with 6.5% at the same stage of 2014/15. The government’s medium-term target is to bring the deficit down to 8‑8.5% of GDP in 2019/20, and for public debt to fall to 85‑90% of GDP by that date, from 93% in 2014/15.
However, suboptimal growth is likely to undermine prospects of raising tax revenue in the short term, making some of those aims out of the government’s reach. The Economist Intelligence Unit forecasts that the 2016/17 budget deficit will narrow only marginally to 11.5% of GDP, from 12.3% in the previous fiscal year.