THE White House yesterday announced a sharp drop in the US budget deficit for the 1996 fiscal year which ended on September 30th at $107.3 billion (£670 million). The figure was the lowest US budget deficit on record since 1981. The deficit for the 1995 fiscal year was $164 billion.

It was the fourth straight deficit reduction under President Clinton. During the first three years of his term, the deficit was reduced by $431 billion.

The deficit reached its highest point during the previous two Bush administrations, when it ballooned to nearly $300 billion in 1991-92.

The White House said half of the improvement was due to the good performance of the US economy and half to the Clinton administration's cost cutting policy.