The deterioration of the fiscal situation has continued, with the general government deficit rising to a projected 7¾ per cent of GDP in 2003 and public debt soaring to more than 150 per cent. The large budget deficit mainly reflects weak economic conditions, which outweigh the authorities' consolidation efforts to date. The government is trying to reduce the deficit by keeping the level of expenditures constant as a share of GDP but, with deflation eroding the tax base, shortfalls in revenue have prevented progress thus far. One positive development is the fiscal reform initiatives launched during the past several years, which have improved the allocation of spending, thus boosting the efficiency of public expenditures...