Johannesburg - The cost of the government's controversial arms package deal has drastically shrunk because of the stronger rand, an economist said yesterday.

The Strategic Defence Package (SDP) was set to cost taxpayers the rand equivalent of $4.5 billion when signed in 1999. That was around R30 billion at the time.

When the rand plunged to an all-time low in December 2001, the price, in rand, increased to around R60bn.

Many expected it to rise to at least R200bn on the back of continued rand depreciation.

But the rand then steeply recovered for reasons as mysterious as its initial decline.

With an exchange rate of R7.95 yesterday, $4.5bn translated into R35.5bn.

"We are nearly back where we started,' PLJ Financial Services economist Dawie Roodt said.

"Although it is cheaper than a year ago, I still do not think it right to spend so much money on arms. There are too many other pressing concerns."

Asked for an outlook on the rand, Roodt said he expected the currency to weaken in the medium to long term. He urged the government to speed up payments under the SDP to take advantage of the strong rand.

Under the SDP the SA Navy is to receive four Meko patrol corvettes and three diesel-electric submarines. The SA Air Force will receive 24 Hawk fighter trainers, 28 Gripen fourth-generation advanced light fighter aircraft and 30 Agusta light utility helicopters.

The cost of a flight of four AgustaWestland SuperLynx 300 maritime helicopters, provided for in this year's defence budget to be voted on by parliament tomorrow, is not included in the $4.5bn total.

Finance Minister Trevor Manuel indicated that, taking into account the expected depreciation of the rand, the entire programme would cost an estimated R52.9bn.

With acknowledgements to Sapa and the Cape Times.