The finance ministry has cautioned tax payers that the income for state coffers do not look so promising. Reacting to recent predictions of two independent experts, Old Mutual chief executive Johannes !Gawaxab and a financial expert from Investec that the budget deficit will increase as Government had to honour nearly N$ 6 million in foreign debts this year, the ministry saw it fit to "allay unnecessary and malignant speculation".

In a statement this week, permanent secretary Calle Schlettwein said "the worse than expected fiscal outturn for the financial year 2003/04 was unavoidable "due to the stronger N$ against the US dollar. Tax revenues collected did not meet expectations and were out of line with the revenue forecasted end of 2002 and revised in November 2003. "As a result, the budgeted fiscal deficit of 4.1% of the GDP turned out to be 7.5% of GDP", Schlettwein disclosed the shocking news. Following the "sudden and sharp turnaround in the exchange rate, the Government had too little time" to institute major fiscal adjustments and reforms, the permanent secretary said.

For 2004/05 the fiscal position changed favourably, according to the statement. Total tax revenue collected until December 2004 stood at 95% of the forecast amount. Mechanisms were introduced to strengthen tax collections and compliance. Despite those efforts, the "total revenue shortfall for this fiscal year will be in the range of 2 to 3% of the budgeted amount", Schlettwein let the cat out of the bag.

After the redemption of a "GC05 Bond" in April 2005, short-term debt of Government would however be significantly reduced, the finance ministry said.