Country Report Peru May 2000 Updater

Economic policy outlook: Fiscal policy

Thanks to the law of fiscal prudence and transparency -- due to be written into the constitution in 2000 -- fiscal management will gain some independence from the political cycle. Recent years have seen crude pre- electoral spending sprees generating substantial deficits, followed by retrenchment to achieve balanced accounts three or four years after an election year. The new law will ensure that the overall NFPS deficit (excluding privatisation revenue) does not exceed 2% in 2000. By 2002 the target will be down to 1% of GDP; the deficit in the first half of an election year will not be able to exceed one-half of the overall annual planned deficit. Revenue increases should come from a widening of the tax base and economic recovery.

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