By EDDIE OSIFELO
THE 2021 Appropriation Bill 2021 is proposing a deficit of around $300 million.
Central Bank of Solomon Islands Governor, Dr Luke Forau stated this when he appeared before the Public Accounts Committee (PAC) in Parliament on Monday.
PAC is scrutinising the three billion, nine hundred and five million, nine hundred and fifty-one thousand and three hundred and sixty dollars ($3,905,951,360) budget.
Mr Forau said in 2020, the fiscal position recorded an overall deficit of $308 million (or 2.5 percent of GDP), mainly driven by lower domestic (tax) revenue collections and covid-19 related expenses
He said the total revenue rose five percent to $3,800 million in 2020 attributable mainly to large grant receipts of $697 million primarily relating to covid-19 responses to support the economy.
However, Forau said this year’s budget is expecting a deficit of around $300 million.
“With the current revenue flow, there are at least two immediate risks to the fiscal outlook.
“First, is the government’s cash reserves is limited to finance the fiscal deficit,” he said.
Dr Forau said second, following from the first, the financing options would be crucial for the government.
However, the Governor said there is ‘dead money’ of around more than $300 million on the budget.
He said these are monies already due to the Government, but never been collected, these include taxes such as exercise tax, company tax, etc. and other fees.
“If the government collects all these monies this year, then the deficit is securely financed,” he said.
Further to that, Dr Forau said this year is the recovery phase of our economy.
“We really need to get the economic fundamentals right.
“The 1.5% growth projected for this year will not be sufficient enough to take the country back to pre- 2020 level.
“The economy needs to grow by at least 5% to 6% before we reach the pre-2020 level. By our estimation, this may occur in around 2024/2025,” he said.
Dr Forau said seeing that international travel and border restrictions remain uncertain to reopen soon, the Government should focus on spacing out its policy priorities into short to medium term and long term priorities.
He said in the short term, which is the recovery phase the focus should be on boosting the domestic demand.
“In the doing so, policy attention should focus on ensuring that the existing companies are supported to get back to their pre 2020 level.
“Simultaneously, policies relevant for medium to long term development should also be looked at to ensure continuity.
“While I haven’t seen the Government’s recent policy redirection, Iam sure it captures some of these things that I just mentioned,” he added.
The PAC hearing continues today.