Gov’t takes drastic decision to reduce overall expenditure

THE Government has taken a drastic decision to reduce overall expenditure from normal SIG revenue sources in order to maintain fiscal stability and affordability of the Government fiscal plan in 2021.  

Finance Minister Hon Harry Kuma highlighted this during his 2021 Budget Speech in Parliament today.

Minister Kuma said this is to ensure funding is always readily available to pay all government suppliers on time. 

The Finance Minister said to help maintain budget stability; all ministries are required to be strategic in their planning to ensure the following objectives are met:

  1. To streamline their activities so that key essential and mandatory services are well resourced within the limited resources available, and
  2. Support to stabilize public service workforce.

Meanwhile, the Finance Minister said the 2021 budget is a very tight budget and the government will need to realistically plan and prioritise its activities in order to achieve tangible outcomes within the 2021 financial year and avoid any commitments that will further derail government’s fiscal situation. 

“First, on the 2021 recurrent budget, total recurrent expenditures are estimated at $2.810 billion in 2021.  This consists of payroll budget estimates of $1.290 billion and $1.520 million for Other Charges,” he said.

Minister Kuma said the total  recurrent expenditures in the 2021 Budget is reduced by $272 million to $2.810 billion compared to $3.082 billion from the 2020 original budget estimates. 

He said the reduction reflects planned reductions in Other Charges budget as outlined below: 

  1. Overall reduction by 40 percent on all ministries’ discretionary and non-essential line items except for productive and resources sectors ministries.
  2. All fixed costs are protected except all grants, which are reduced by 15 percent.  Utilities are also reduced by 5 percent.  Ministries are asked to manage at reduced amounts and impose stringent control measures on the usage of utilities.
  3. Scholarship budget is reduced by $120 million.  No new overseas scholarships will be considered in 2021 except for in country scholarships. Allowances and other allowances will also be reviewed and considered at reduced amounts during the year.
  4. All overseas-related travels have been reduced, as Government will not allow overseas travels in 2021 until we complete the vaccination roll out program, and  allow travel and trade activity to normalise. 

Mr Kuma told Parliament that in line with the 2021 Budget Strategy, the Government has also decided to stabilise public sector workforce in 2021.

“The government’s overall policy redirection plan is to manage payroll costs in 2021 and continue with current ongoing public service reforms,” he said.     

The Finance Minister also stated that the Government has already imposed a recruitment freeze across the whole of Public Service and this is effective as of 2nd January 2021.

He said in spite of the overall freeze on new recruitment, the Government through the Ministry of Public Service will consider and redirect vacant positions in its strategic areas of policy priorities, especially in both the productive and resource sectors, including essential services.