Although the estimated recurrent budget surplus was not as much as expected it is still likely to achieve a surplus of R4.7million this year which will go towards the overall deficit - R388.7 million for the current fiscal year and around 11% of GDP. Mr Michel said: 'the most positive and encouraging outcome so far this year has been the total absence of Central Bank financing of the overall deficit.'

'In fact,' explained Mr Michel, 'on a net basis, the Government is expected to repay R20 million to the Central Bank by the end of the year. The overall budget deficit is expected to be financed entirely by domestic bank sources and non-bank private savings through the issue of approximately R389 million of net additional Treasury Bills and Bonds.'

He also confirmed that the government had experienced a reduction in trades tax collections and there was also a shortfall in receipts of dividends and interest leading to an 11% fall in revised receipts. Added to this was the postponement of the sale of assets programme which was to sell government-owned housing stock, but this will now go ahead as part of the budget's introduction of a package of home ownership measures.

Mr Michel explained that the shortfall in revenue collections will be 'made up, albeit only partly, by buoyancy in business tax receipts (+8%) and fees and fines (+8%), entirely on account of a significant increase in collection from stamp duties.'

The home ownership scheme will allow for rebates to be given on mortgage and rental payments. The government also intends to invest in the construction of new homes and will support banks in the Seychelles to enable them to offer housing loan schemes at favourable interest rates.

The budget did not significantly increase spending for the government ministries and departments as was expected. Vice President Michel said they would be provided with a budget only marginally higher than last year's figure and not exceeding R728.3million.

Capital projects were allocated a ceiling figure of R250 million a significant proportion of which will go towards the continuation of the East Coast Phase III. Mr Michel spoke of the government's view of the economic importance of the project: 'Unless there are further unforeseen technical events, we expect the project to continue smoothly during the course of next year with the cutter-suction dredger Vesalius. We remain convinced that the East Coast Phase III is the key to our economic future and the completion of the project in 2002 will be a continuing priority.'

Later this week the National Assembly will begin a debate on the general principles and merits of the Appropriation Bill, 2001. The Bill will allow for expenditure appropriation of R1,225,536 which will meet the recurrent expenditure requirements of central government for the financial year ending 31 December 2001.