Details of the 2011 budget are confused. Despite the president's frequent promises to reduce public-sector waste and the government's programme with the IMF, which envisages fiscal consolidation to reduce the budget deficit, local media have reported that parliament passed a UM500bn (US$1.8bn) budget in early December. If true, this would represent a 69% increase on the latest estimates for 2010 expenditure and a 75% increase relative to the government's programme with the IMF. According to the IMF resident representative, the budget figures presented in the press are unlikely given agreements between the IMF and the government. As a result, we have scaled down our budget forecast for 2011 and expect a limited expansion of expenditure, of 5% per year over the forecast period, as spending broadly keeps pace with inflation. A mining conference held in mid-November led to a spate of new mining permits being purchased, which will boost revenue. Moreover, economic activity is forecast to improve further in 2011 and 2012, which will support the tax base. Efforts to restrict the recurrent budget are likely to be frustrated in advance of a municipal election in 2011 and a legislative election in 2012. Military spending will also increase as the president seeks to maintain the loyalty of the armed forces and as the country's fight against terrorism continues. The capital budget will be expanded slightly, although absorptive capacity constraints will limit its execution. In view of these trends, we expect the fiscal deficits to narrow further, from an estimated 4.2% of GDP in 2010 to 3.5% of GDP in 2011. The deficit will then shrink further, to 2.9% in 2012. The deficit will be funded by a mix of domestic borrowing and an increasing proportion of concessional foreign loans.