AS usual, the message of the State Bank`s first quarterly report on the state of the economy is buried deep inside the details. One has to wade past many accolades to get to the government`s track record, as well as ignore a few misleading statements that appear to have been gratuitously inserted, in order to glean the reality that the report is trying to convey.

Consider two areas covered by the report: the fiscal situation and the external account. The latter has been weakening consistently for over a year now, while the former has been in the spotlight for two reasons. First, this is an election year and keeping the fiscal framework in check is always challenging when the polls approach.

Second, the government announced a budget indicating highly optimistic projections of revenues and expenditures last summer, with current expenditures actually programmed to go down after adjustment for inflation. No surprise, then, that all eyes have been on how well this will play out.

Regarding the fiscal situation, the State Bank notes the large growth in revenues in the first quarter, coming in at 18.9pc, and goes on to say that this growth is `broad based`. But a look at the details reveals otherwise. Much of the growth in revenues comes from withholding taxes, sales tax and excise duty collections, attributable to higher fuel prices, high imports and large government spending on development projects. In short, a large proportion of the increase in revenues can be attributed to a collection effort tapping into existing sources of dynamism in the economy, and not necessarily to a broadening of the revenue base. And even the sources of dynamism are narrow, based largely on massive government spending through the development programme, rather than a growth of the domestic market or innovation. Expenditures remain confined, but more than half the increase from last year is attributed to debt servicing and defence, with the latter growing by 20pc on what the report calls CPECrelated expenditures.

On the external sector, the report first notes the improvement in exports and remittances before adding that concerns about the health of the sector `persisted` as imports rose even more sharply.

Payments on power-generation machinery produced a high burden on the interbank market, even though their imports slowed down in the first quarter, `representing lagged payments for earlier shipments`. The current account deficit rose to $3.7bn, more than double its size in the same quarter last year. It is difficult to paper over this issue. The economy is turning out an out-of-balance performance, as growth rates rise but so do the deficits. It is a matter of time before we find out which of these two the realsector growth or the growth in the deficits on fiscal and external account is here to stay.