GABORONE, Feb 7 (AFP) - Botswana's 2000/2001 budget is expected to turn a nearly 50 million pula (10 million dollar) surplus, Finance Minister Baledzi Gaolathe told the national assembly of the diamond-rich country Monday.

Gaolathe also revealed that the predicted 400 million pula (84 million dollar) deficit for last year's budget was now expected to become a 510 million pula (107 million dollar) surplus after increased diamond sales.

His 2000/2001 budget, to kick in in April, provided for about 11.730 billion pula (2.5 billion dollars) expenditure, about three percent increase on the previous year.

Revenue was forecast at about 11.777 billion pula (2.48 billion dollars), 1.2 percent down on the previous year, due to expected reduced investment.

About 8.2 billion pula (1.7 billion dollars) was allocated to recurrent spending on existing projects, up nine percent on the 1999/2000 amount.

Of this 27 percent would go to education and 18 percent to local government.

About 8.5 percent was allocated to defence, up from last year's eight percent, and 6.9 percent to health, up from 6.2 percent.

The development budget, for new projects, dropped about 11 percent on last year to 3.5 billion pula (716 million dollars), he said.

Almost a quarter of this was for local government projects, including building new primary schools and water projects, and about 16 percent for the president's office, the bulk of which would be spent on housing for the army and re-equipping the defence force and police.

Gaolathe repeated warnings on increased government expenditure, which grows more than 21 percent annually, and the accelerated spread of HIV/AIDS.

Botswana has one of the world's worst problems with the disease, with about 17 percent of the adult population estimated to be infected.

Gaolathe said the economy had slowed down, with growth at 4.5 percent in 1998/99, from eight percent in 1997/98.

This was mainly due to a 4.4 percent drop in mining output because of decreased demand for diamonds and a 3.1 percent drop in agriculture after drought.

Government's attempts to wean the economy off diamond production had shown 11.1 percent growth in the tourism sector, 11.9 percent in the financial sector and 5.4 percent in manufacturing, he said.

Botswana's foreign exchange reserves stood at 28.5 billion pula (six dollars) at the end of December 1999, representing about 28 months' cover of imports of goods and services.

He said diamond sales in the 1999/2000 year increased to reach 10 billion pula (2.1 billion dollars), 67 percent more than in 1998.

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