Dear Editor, How is it that a $20.6 million hole has now appeared in the 2024/25 budget – via the Half-Year Economic & Fiscal Update (HYEFU) – a deficit which was not forecast when the budget was tabled in parliament in May/June last year?

The projected fiscal deficit in the 2024/25 budget was $0.7 million.

In the HYEFU (which was published in December 2024), the fiscal deficit has climbed to $20.6 million. The explanation given for this in the HYEFU is that $19 million in capital expenditure has been carried forward from 2023/24 to 2024/25.

There was already $19.1 million earmarked in capital expenditure in the 2024/25 budget when it was tabled last year. The HYEFU estimates that $26.3m (with $15.3m depreciation – the same as in the budget) is the total in capital expenditure to be spent in 2024/25.

So where is this $19 million that has been carried forward?

What is the real reason for acquiring the ADB loan of NZ$49 million (Cook Islands News 21 December 2024)?

The deputy prime minister said in parliament that he would ban overseas travel if he became PM (Cook Islands News 6 December 2024). The prime minister (and finance minister) should think carefully about what the DPM said and not top up the MPs’ travel allowances in this upcoming supplementary budget in February. It is not a ‘critical priority’.

Cabinet ministers collect almost $2000 per week even when they are not in-country. Why do they need to come back home with an extra few thousand dollars in their pockets after a single ‘work’ trip?

Moana Moeka’a

Ruatonga

Financial Secretary Garth Henderson responds:

Kia orana, it is always good to see people taking a close a look at the numbers in any budget update, so we welcome your questions and the opportunity to explain.

The ability to ‘carry forward’ expenditure applies when there is an amount of funding unspent in a fiscal year and the work it funds continues into the following fiscal year. For example, if a roadworks project is delayed past 30 June, the funding does not disappear – since the work still needs be done. Due to a number of constraints – particularly labour constraints – completing projects in recent years has been more challenging, leading to increases in the amount of funding carried forward at the end of the fiscal year.

In the 2024/25 HYEFU, a total of $19.0 million was carried forward from 2023/24 to 2024/25 – which was made up of $7.3 million in capital expenditure, and $11.7 million in operating (which encompasses categories such as personnel, operating, depreciation, Administered Payments and Payments on Behalf of Crown). These details can be found at page 36 of the HYEFU document on the MFEM website.

The effect of shifting unspent 2023/24 funding to 2024/25 is that the 2023/24 surplus becomes larger (because we spent less), while the 2024/25 deficit becomes larger (because we intend to spend more, i.e. what we didn’t spend in 2023/24). However, this difference is due purely to timing.

In the 2023/24 Budget, a deficit of $8.3 million was estimated, owing largely to unspent funding that was carried forward, there was ultimately a surplus of $9.8 million in 2023/24 – a movement of $18.1 million. This expenditure is then accounted for in 2024/25 (as it has been carried forward), pushing the deficit for that year from $0.7 million to $20.6 million. The overall picture across those two fiscal years changes only slightly, reflecting a move of some spending from before 1 July 2024 to after.

So, if we adjust for this timing, the 2024/25 fiscal deficit reduces to $1.6 million. From 2025/26 onward, the fiscal balance is expected to improve significantly, with robust surpluses projected.

As noted previously, the loan from the ADB is a key part of managing our finances as the economy moves out of the recovery phase and to a more business-as-usual phase. It allows government to manage its cash position to ensure that there are appropriate reserves in place, enabling the funding of critical infrastructure projects including roads, bridges and shipping for the Pa Enua. It is the result of two years of working closely with the ADB as a key development partner to achieve important goals for the Cook Islands.