The favourable rate of exchange, unspent funds from previous years and delays in delivery schedules had resulted in a saving in 2003/04 in the strategic defence packages of R1 billion, says Finance Minister Trevor Maunuel.

Manuel presented his Medium Term Budget Policy Statement and adjusted estimates of national expenditure in the National Assembly on Wednesday.

In the Budget review in February Manuel noted that 6.8 billion rand was scheduled to be spent on the arms deal in 2003/04, through which the defence force will acquire four naval corvettes - the first arrived in South Africa last week from Germany - three submarines, 30 light utility helicopters, 24 trainer aircraft and 28 fighter aircraft at a total cost of 1999 prices of US$4.8 billion.

Spending under the Special Defence Account for the acquisition is expected to be R5.4 billion in 2004/05 rising to R7.8 billion in 2005/06 but dropping back to R5.5 billion in 2006/07.

A Treasury official at parliament said that more savings were expected in the years ahead owing to the exchange rate and phasing down of the contracts.

A closer reading of the adjusted estimates for the defence department indicates that R797 million is to be saved in the special defence account vote plus a total of R30 million for "virement" in 2003/04.

This is explained as consisting of savings generated under one main division of a vote being used to defray excess expenditure under another main division of the same vote.

With acknowledgements to Donwald Pressly and the Business Day.