The Government is reducing expenditure and pursuing additional revenue measures to maintain a budget deficit close to the 2015 Budget forecast, says Treasurer Patrick Pruaitch.
In a media release, Pruaitch says the forecast from the 2015 Budget has been significantly impacted by a sharp fall in commodity prices.
“This has required downward revisions to tax and non-tax revenue receipts, particularly from the mining and petroleum sector.”
He said the 2016 Budget therefore will be framed against two dominant adverse influences.
“Firstly, a relatively weak world economic environment that is still adjusting to a lower commodity price outlook and secondly, lower than anticipated growth within the domestic economy due in part to the effects of drought in many parts of the country.”
However, Pruaitch says the government has responded by continuing to pursue broad-based economic growth while ensuring macroeconomic stability and creating a pathway for fiscal consolidation.
He added that consolidation will be achieved through:
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Ensuring expenditure prioritisation (in light of the lower revenue scenario) and improving the quality of spending to derive the greatest value;
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Refining the tax system to improve efficiency and broadening the tax base for sustainable revenue;
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Managing the government debt profile through capital markets structural reforms and including the issuance of a sovereign bond;
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Pursuing structural reforms in the State Owned Enterprises sector and the size and efficiency of the public sector; and
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Continuing to undertake budget reforms and other complementary policies.
Pruaitch said the pace of fiscal consolidation over the medium term needed to be carefully managed to accommodate high priority expenditure projects that would continue to promote broad-base economic growth and employment.
“This means that deficit levels over the medium term need to be gradually reduced until the budget returns to balance by 2020.”