Zloty stages rally following Cabinet's decision on limiting budget deficit

The Cabinet has agreed on a budget amendment plan that does not specify by how much expenditure will be reduced. The Finance Ministry plan originally provided for the budget deficit to increase by zl.8.6 billion, while expenditure would be reduced by zl.7.5 billion. However, when ministers came to discuss spending cuts, none of them was willing to reduce their respective ministries' budgets. In what is being described as a fairly moderate increase in the budget gap, the deficit will be allowed to increase by zl.8.6 billion to zl.29.1 billion, with expenditure cuts to be determined later, depending on the revenue situation. Finance Minister Jaroslaw Bauc said he is "90% certain" that parliament will approve the amendment quickly. Since the government will not be able to exceed the newly agreed deficit figure, spending cuts are almost certain. Following the government's announcement of the amended budget plan, the zloty surged 2% against the dollar and 3% against the euro yesterday. Analysts questioned by Reuters said they expected the zloty to remain at around 4.30 to the dollar and 3.67 to the euro until the end of the month. (Gazeta Wyborcza, p. 4; Reuters) T.J.