South Africa has cut its growth forecast because of the threat of war on Iraq, but is still offering tax cuts and higher spending on health and crime-fighting in the budget for the coming year.
Low income earners get tax cuts in the budget
Finance Minister Trevor Manuel unveiled the 334bn rand (£26.2bn; $41.3bn) budget in Cape Town on Wednesday.
He revised growth forecasts for 2003 to 3.3% from the 3.5% set in October, after the economy grew by a robust 3% in 2002.
"Despite a bleak global environment our economy registered improved growth last year," he said.
"Our projections indicate that over the next three years we will continue to experience growth and see progress with employment creation," he added.
Mr Manuel announced a 13.3bn rand tax break for middle to low income earners, thanks to higher tax receipts last year, and lowered the tax on pensioners' retirement funds from 25% to 18%.
More than 3.3bn rand will be spent on Aids prevention and care for the estimated 4.7 million South Africans - about 11% of the population - who are infected with HIV.
There would also be more spending on nutrition programmes and salaries of health workers.
The country's justice ministry is to receive an extra 1.7bn rand over the next three years, with police funding increasing by 11% this year.
Mr Manuel reflected the higher spending and weaker economic outlook by increasing the budget deficit target from 2.2% to 2.4% from 2.2% of economic output.
After reaping an estimated 10bn rand in this financial year from privatisations - mainly from the sale of telecoms utility Telkom - revenues will drop to 5bn rand in the coming year.
Scheduled for privatisation are management of Durban's port, and a 30% stake in the Eskom power business.
Eskom is considered the crown jewel of South Africa's state assets, but the government will not sell off a majority stake until millions of rural homes have been connected to the national grid.
Mr Manuel maintained the inflation target of 3-6% for a further year despite expectations that it will continue to overshoot.
Inflation appears to have peaked at 12.4% in December, falling to 11.8% in January.
"We remain committed to inflation targeting and believe that price stability remains one of the cornerstones of sound macroeconomic management," he said.
"On the back of the stronger exchange rate and modest increases in input costs, the inflation rate is expected to fall below 6% by the end of 2003," he said.
The rand has gained about 7% against the dollar this year.
The central bank is not expected to cut rates before June, after an increase to 17% last year to contain inflation, following the rand's 37% drop in 2001.