“Over 50% shortfall in government revenue is expected this year based on current trends that we are seeing,” reported Minister of Finance Elbuchel Sadang at the national leadership meeting yesterday addressing the COVID-19 crisis.
The government revenue shortfall is expected to affect not only this fiscal year but also the next fiscal year. It will take a while for tourism to rebound according to Sadang as many of the travelers are also impacted in their own countries and will need to recover before they resume travel.
Last month while working on the supplemental budget bill for FY 2020, $6 million was added to the budget in anticipation of a 10% shortfall in government collections due to the news of the new coronavirus.
Based on the trending situation around the world, flight suspensions and travel bans, the government is reassessing its earlier projections.
“In all the years I have been a minister of finance, this is the worst,” expressed Minister Sadang. Sadang served as Minister of Finance in the first two terms of Remengesau and in these last two terms, making him the longest-serving Finance Minister with nearly 16 years of service.
Minister Sadangassured that the source of funds to combat COVID-19 comes from available NCD Funds and the $6 million to cover shortfall comes from General Reserve Funds. These funds are already available and will not be affected by a budget shortfall.
The FY 2020 Annual Unified Budget projected unrestricted local revenue collection of $66.5 million dollars to fund this year’s government general operations.
The $66.5 million projection was based on assumptions of increased tourism activity due to the resumption of direct flights to and from Japan as well as expanded construction activities.
This year’s general operations budget is $86 million, $66 million of which was to be funded by unrestricted local revenue.
Based on Minister Sadang’s anticipated revenue loss of over 50%, the budget may fall short of over $30 million dollars for this FY 2020. General operations budget covers the Executive Branch, Olbiil Era Kelulau, Judiciary, State block grants, educational assistance, and independent agencies.
Sadang said they are currently reviewing the books and will provide a new report to reflect the changed financial position of the government.