The huge national government budget deficit has been a major cause of the low pace of the country’s growth in recent years. Government did not have enough funds to finance key projects. With the expanded value added tax, this will soon be solved. In just two years or by 2008, there will no longer be a deficit.

When there is such a deficit, government has to borrow and in so doing it competes with the private sector. This has the effect of increasing interest rates, thus adding to inflation because the cost of production goes up.

With a balanced budget, the government does not have to borrow.

An important point, however, is for government to continue funding its development projects such as in infrastructure, health and education.

Low government spending due to a desire to achieve a balanced budget can reduce the rate at which our economy grows.

Hence, there is a need to balance the desire to reduce the deficit and the need for government projects so that the economic growth targets are met. The ideal target is for the economy to grow at 7 percent annually.

If it grows at only 5.5 percent this year, then more spending is needed next year. If this is done, then a balanced budget may not be achieved in 2008.

This depends on how well the revenue targets are achieved. So far, the national government is right on track with VAT collections exceeding the target for the first nine months of the year.

It looks like reducing the deficit and achieving a balanced budget is a realistic target.