Tonga's Minister of Finance Hon Siosiua T. T. 'Utoikamanu, has again expressed his concern over the projected significant decline of government's revenues, urging tighter government spending, and warning that government has few options for recovery after its reserves were used to pay for the civil service pay settlements last year.

The Minister said in a statement on April 28 that the decline in government's revenue projections for the Budget of 2008, "is caused by the revenue loss and lower consumer spending after 16/11.

"This will weaken the economy and limits the attractiveness of private investment in Tonga," he warned.

"Our revenue reform programme will help add revenue through improved compliance. However, this reduces money in the private sector in the short-term and reduces profitability of private businesses affected by 16/11. Demands for various forms of tax relief are therefore increasing - and if granted, these would remove the fiscal benefits of improving compliance.

"Unfortunately, the Government's reserves were used to fund the public service pay settlement last year and the planned privatisations to rebuild the reserves did not occur.

"We cannot borrow domestically to fund a possible deficit because this will crowd out the private sector business recovery efforts so we have limited options available.

"There is no easy short-term solution to this problem except for a continuous tightening of fiscal expenditure and more effort to encourage private sector growth," he said.