Finance Ministry data for January to April 2007 show an increased fiscal reserve and a widened budget surplus.

The fiscal reserve increased by 29.7 per cent year-on-year and 3.7 per cent in a month to three billion euro at the end of April.

The debt prepayment of 230 million euro in April was more than offset by the big fiscal surplus in the same month.

The fiscal reserve thus reached 54 per cent of gross public debt and will cover nearly three years of the projected principal and interest payments in the public sector. Moreover, the changes in the government deposit with the central bank prompted a further strong improvement in the overall fiscal reserve in May to more than 3.3 billion euro at the end of the month. The change is also indicative of an equally strong expansion in the budget surplus.

Tax revenues in April pushed up the tax growth rate to 11.5 per cent in real terms. The total amount of VAT revenues in January to April stayed almost unchanged in relation to a year earlier, while direct taxes on individual and corporate incomes surged by real 30 per cent, despite the profit tax reduction from 15 per cent to 10 per cent as of the beginning of the year and the small decrease in the personal income tax burden.

Revenues from corporate profit taxes performed much better than the government projections, reaching 66 per cent of the full-year estimates in only four months. The overall value of tax and not-tax revenues grew by 12 per cent in real terms, improving from 9.7 per cent in January-April.

The general budget surplus widened by 45 per cent to 649 million euro. The widening would have been much steeper at about 70 per cent if the country’s contribution to the EU budget were taken out. The surplus in January-April accounts for 2.4 per cent of out full-year GDP projection as compared to 1.8 per cent for the same period last year. The figures confirmed expectations of a full-year surplus of about five per cent against the government’s target of two per cent. It is even possible to see a more radical widening to eight per cent if budget revenues are kept within the more restrictive scenario for curbing the CA gap. However, the latest social calls within the left-wing senior ruling partner and the autumn municipal elections would tend to keep fiscal expenditures close or above the baseline projections voted in Parliament.