THE 2013 Budget projects a net deficit equivalent to 2.8 per cent of Gross Domestic Product because of increased expenditures to upgrade infrastructure like roads, renewable energy, water, sanitation and information, communication and technology.
These economic conditions were noted in the Asian Development Bank's Pacific Economic Monitor: December 2012 report launched recently in Suva.
The report was presented by lead authors, ADB Headquarters senior economist Christopher Edmonds and ADB Suva office senior country economist Caroline Currie.
"The deficit will be financed through domestic borrowing, and loans from the Export-Import Bank of China and the Export-Import Bank of Malaysia," the report said.
"This raises long-standing concerns about the sustainability of government spending and debt levels.
"The latest budget allocates 32 per cent of total expenditure on capital works compared with about 20 per cent in previous budgets.
"The change in the operating to capital ratio has been funded by an increase in deficit rather than through structural or administrative improvements."
The report says this may be difficult to sustain over the medium-term and pose a risk to the fiscal position. Ministry of Finance permanent secretary Filimoni Waqabaca clarified operating and capital ratio data presented by the team, adding it was important for reports to specify correct information about a country's economic progress.
"The audience that reads (this) is much wider, international readers who would like to know what is happening in each of the countries so it is critical to put up correct information —that is what we've discussed with ADB and we will make some adjustments to the numbers presented so that the right information goes up," he said.
Meanwhile, Mr Waqabaca said government's target deficit for 2011 was negative 3.5 per cent while the actual outcome was minus 1.4 per cent — a result that was lower than what was targeted.