Budget part of steps to climb out of crises: Treasurer

TREASURER Ian Ling-Stuckey said the 2020 Budget is the start of a five-year strategy to climb out of the current deep economic hole.
“The starting point at the time of my appointment as Treasurer on Aug 27, 2019, has now been revealed as a debt to GDP ratio of 42 per cent,” he said in a statement.
“The debt to GDP ratio will be reduced from 42 per cent to 38 per cent in just five years.
“Clearly, getting debt back under control is a long-term task given the mismanagement during the (Peter) O’Neill lost decade.”
The Treasurer said the Government was committed to working within the existing legal framework governing borrowing.
“The financing requirement for 2020 will result in total Government debt reaching K37.185 billion by the end of 2020,” he said.
“This is equivalent to 40 per cent of GDP, a huge number but a good improvement from the O’Neill legacy of 42 per cent.
“The figure is well within the prescribed revised Fiscal Responsibility Act target range of 40 to 45 per cent of GDP.
“We need to maintain some fiscal space in case of adverse international economic developments or natural disasters.
“The Government will continue to pursue all avenues of cheap and concessional financing from trusted partners to ensure compliance with the Fiscal Responsibility Act and to reduce the major burden of debt interest costs.
“The starting point was a budget deficit equivalent to 5.8 per cent of our economy.
“Budget deficits directly add to debt. The size of this increase was totally unacceptable.
Ling-Stuckey clarified that the record K4.631 billion deficit in the 2020 budget included a planned K1,050 million pay-down of arrears and a K500 million expansion of capital expenditure from concessional loan drawdowns. Removing these two “non-core” factors, the “core” budget deficit is K3.081 billion in 2020.
Repayment of arrears and higher loan drawdowns will depend on financing availability, he said.
The Treasurer said the Government would reduce the fiscal deficit 5.8 per cent to 5.0 per cent this year, including arrear payments and additional multilateral project financing, or 3.3 per cent excluding such non-core payments.