Prime Minister's Budget Framework Letter

The framework letter for the FY2011-2012 budget, addressed to all ministers.

It opens on the 12 January earthquake, which the letter records as having caused a 5% fall in GDP, and on the international solidarity that led the country's leaders to anticipate a recovery in 2010-2011. A growth rate of 9.8% was targeted on the basis of international aid, to be supported by high value-added sectors: agriculture, construction and public works, manufacturing, and a tertiary sector dominated by commerce and telecommunications.

On the latest estimates that level was not reached, which the letter attributes to poor performance in agriculture and to slowness in starting the major reconstruction works. Recovery in commerce and manufacturing is expected to offset the agricultural contraction, leaving real GDP growth of the order of 4%.

Year-on-year inflation reached 10.6% at end-September, above the 9.1% projected at the start of FY2010-2011. The letter attributes the pressure to food prices and international oil prices, despite the automatic fuel price adjustment mechanism having been suspended on the local market for most of the year. Good performance by the collecting agencies, which exceeded their fiscal revenue forecasts, partly offset the low disbursement of external aid, and of programmed budget support in particular. Budget policy conceived in a reconstruction context was affected accordingly.