There were strong indications on Monday that the Federal Government might fund the N1.4tn fiscal deficit in the 2011 budget through domestic borrowings.
Investigations by our correspondents in Abuja revealed that the Ministry of Finance would opt for the issuance of bonds through the capital market to fund the deficit.
It was learnt that government would also rely on the revenue expected to be turned in by the 31 corporations and agencies listed in Section 21 of the Fiscal Responsibility Act. Another source of funding fiscal deficit, investigations showed, would be the external reserves.
The 2011 budget, which was presented by President Goodluck Jonathan to National Assembly members last Wednesday, was predicated on projected revenue of N2.83tn, while total expenditure (both current and recurrent) stood at N4.2tn.
While the expected sources of revenues and the expenditure were highlighted in the budget presentation, funding the fiscal deficit was not mentioned.
The Minister of Finance, Mr. Olusegun Aganga, could not be reached for comments on how the Federal Government intended to fund the N1.4tn deficit as he was said to have travelled to China on official duties.
But his Senior Special Assistant on Communication, Mr. Okwudili Elendu, confirmed that the deficit might be funded from domestic borrowings.
Total borrowing in the country is currently 16 per cent of the country’s Gross Domestic Product and it is lower than the 40 per cent limit for developing countries.
It was also learnt that since the Federal Government had decided to cap the approved borrowing limit of the country at 25 per cent, the bond market could still serve as a window for funding the fiscal deficit.
Okwudili said that the bonds would be floated at the capital market by the Debt Management Office.
He said other financing options open to the Federal Government would be external reserves and the stabilisation element in the Sovereign Wealth Fund.
The bill for the SWF has not been passed by the National Assembly.
Akandili said, “The government usually finances deficit from borrowings, both internally and externally, and we can also draw from reserves. Also, revenue can go beyond what was projected and when this happens, we can, within the dictates of the law use it to fund the deficit.”
Source:http://www.punchng.com/Articl.aspx?theartic=Art20101221311693
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