Budget finalised when economy still recovering: Minister Koanapo

By Terence Malapa.

The 2025 Budget Appropriation has been finalised during a period when the economy is still recovering from the voluntary liquidation of Air Vanuatu and the aftermath of the destructive earthquake that struck Port Vila in December of last year.

Minister of Finance Johnny Koanapo made this statement in his introductory remarks on the 2025 Budget fiscal strategy report, which accompanied the Budget Appropriation Bill presented to Parliament yesterday and will continue to be discussed today.

Minister Koanapo noted that other factors contributing to the slow recovery include delays in implementing planned capital expenditures and labour shortages, which have further hindered growth expectations for 2025.

“Despite these challenges, the Government remains committed to improving service delivery and focusing on relief, response, and recovery efforts related to the earthquake to boost economic growth during this downturn,” he stated.

He mentioned that the estimated GDP growth for 2024 has been revised downward, from an initial forecast of 2.8 per cent to the current forecast of 2.2 per cent. The 0.6 percentage point downgrade reflects the impact of the voluntary liquidation of Air Vanuatu on the economy, particularly in sectors such as accommodation and food, retail and wholesale, and information and communication.

Minister Koanapo added that government revenue (excluding donor financing) is expected to decrease by 4.7 per cent, from VT47,409.3 million in 2024 to VT45,178.6 million in 2025.

“This decrease is primarily due to an expected reduction in both the Value Added Tax (VAT) and the Honorary Citizenship programme. Including VT15.3 million from the sale of fixed assets, VT4.0 million from currency gains and losses, VT407.5 million from VAT paid by departments, VT28.6 million from trust funds, and VT4,138.6 million from the issuance of government bonds, the total revenue is projected to reach VT49,772.5 million, which will fund the Government Budget Appropriation of VT49,772.5 million,” he said.

This represents a decrease of 12.8 per cent compared to the 2024 original Budget Appropriation of VT57,051.0 million. While this is a reduction, it is necessary to restore the fiscal position to a sustainable level.

The total budget for this year is VT68 billion, compared to last year’s total of VT77 billion, marking a decrease of VT8 billion.

Parliament will resume this morning after being adjourned yesterday to allow Members to review the appropriation bill and prepare for the debates during the session.

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