Budget revenues still off target

Dramatic reduction in public spending sees primary deficit contained in the Jan-to-May period By Prokopis Hatzinikolaou

State revenue data for the first five months of the year are substantially worrying, owing to the delay in the submission of tax statements, although the reduction in expenditure has kept the budget on target, according to official figures released yesterday by the Finance Ministry.

The state is only disbursing money to pay for salaries and pensions and not for procurements or the payment of ministries? obligations. The figures would have been much worse had the Public Investment Program not been sacrificed once more on the altar of the deficit, accentuating the deep recession the country is going through.

Net budget revenues lagged the government?s target by 666 million euros in the year to May while shrinking by 1.1 billion euros from the same period last year. The collection of 19.4 billion euros, before tax returns, compared with 20.5 billion euros in 2011. In May alone revenues amounted to 3.5 billion euros against 3.8 billion in May 2011, posting a 9.57 percent decline.

State spending, however, was 2.9 billion euros below target, at 30.54 billion euros, with budget spending dropping by 1.5 billion euros and the Public Investment Program shrinking by 1.4 billion. There was also a decline of spending by 300 million euros in salary costs. The Finance Ministry is looking into the reasons for that but assumes it is due to the early retirements.

The primary deficit, which excludes interest payments, came to 2.4 billion euros, against a target for 4.2 billion euros.

The ministry now calculates that its cash reserves will last until July 20 for the state, against a previous forecast for end-June, as the government continues to issue treasury bills. Sources suggest that the state currently has no more than 2 billion euros in its coffers.

An emergency scenario suggests that cash reserves could last until the end of the year, but only by paying for salaries and pensions and nothing else. The ministry is not contemplating such an option at this stage, though, as that would signify a killer blow to the already stagnant market.