CAIRO: The government is forecasting an overall budget deficit for the 2007 to 2008 fiscal year of 6.9 percent of gross domestic product and a cash deficit of 6.7 percent of GDP, a finance ministry report said on Sunday.

The ministry said in the report it was committed to a deficit target of 3 percent of GDP by 2010/2011, with a reduction rate of 1 to 1.5 percent of GDP per year.

The leading fiscal indicators are seen to be improving on a steady basis, Egyptian Finance Minister Youssef Boutros-Ghali said at a press conference.

Inflation has dropped to 10.5 percent in the 12 months to May from 12.8 percent in March, a government official has said.

Boutros-Ghali said the expectations were based on the government s oil price assumption for the next fiscal year of between $62 and $65 per barrel. ($1=LE 5.70)