We expect the government to maintain its aim of seeking to boost development spending in the coming years. The extent to which the deficit rises, however, will depend on a combination of domestic revenue growth and the government's capacity to increase spending, notably on development projects. Capacity constraints tend to mean that development expenditure comes in below target, and this trend is expected to continue. Meanwhile, with the economy picking up steadily, domestic revenue collection should continue to improve. We therefore expect the fiscal deficit to peak at 6.6% of GDP in 2010/11 (July to June) before falling back to 6% of GDP in 2011/12, owing to strong economic growth that should translate into increases in revenue collection. In addition, although the fiscal stimulus will be maintained, it will not be at the same level as seen between 2008 and 2010, when the government attempted to offset the effects of the poor global economic environment.

Disquiet among donors over corruption scandals and the slow pace of reform, as well as their own budgetary pressures, means that direct budget support will not keep pace with the growth in domestic revenue. Despite this, project support will remain vigorous. In addition, there is still considerable scope to increase domestic borrowing, which is inexpensive at the moment, as interest rates on government securities are low, although we expect them to rise moderately during the forecast period. The government will also continue to consider issuing a debut Eurobond and may even agree a syndicated bank loan.