Y Ariannol Dyddiol (the daily financial) is a economics and business-oriented newspaper, with a liberal bias, that covers domestic issues in Aloria.
August 5430
New Budget Cuts Shake Public Sector
The new budget for this year breaks with previous Ein Hunain tradition of increasing spending and will cut public sector spending by 4 billion. This was proposed last Friday by Finance Minister, Llwyd ab Arfon, in a press conference that caused a lot of upheaval. The administration has been steadily increasing spending the last decade in an effort to support large infrastructure projects and restore order in a country filled with political turmoil. The administration has prioritized this big government approach combined with low taxes on corporations, resulting in substantial deficit spending. These budget cuts (which we will get into shortly) were thought by many to symbolize a shift towards more fiscal conservatism. But this idea was quickly put to rest when Lloyd ab Arfon announced a 50% reduction of the sales tax on luxury goods. A tax that primarily concerns the sale of Alorian golden jewelry to foreign buyers. This tax has provided a solid 580 billion ALO in revenue for the past ten years.
This tax cut means that the deficit that was expected to shrink, following the announcement of spending cuts, will now instead continue to grow, and grow even faster. Lloyd ab Arfon is however not too concerned with this. He was instead pretty pleased with himself when he reported on the economic outlook of the country and the results of the newly finalized national highway construction. The stability of the Alorik has been a hotly debated topic among Alorian economists, and Artanian economists for that matter. It is one of the weakest currencies in the continent and the argument for keeping it has mostly rested on ideas of national pride and developmentalist notions of self-reliance. Although the Alorik is better today than it was prior to the Ein Hunain administration, no one argues that it is a good currency. Foreign currencies are often used in Aloria to sell and buy goods. Many economists propose adopting the Dundorfian Mark or the Lourennian Franc. The discussion about this issue will continue, and will most likely intensify, now that the deficit is increasing further.
But what do these cuts mean to the public sector?
The budget in total spends 4 billion ALO less than the previous one, but many different department and ministries were cut more than that. Certain ministries and departments saw increased funding. The cuts in question target the ministry of finance, ministry of defense, ministry of internal affairs, ministry of environment and tourism and the ministry of foreign affairs. Most targeted was the ministry of finance, which got cut by 6 billion ALO. This was the most radical change in the budget and most of the press conference concentrated on what it meant for the ministry and for the Federal Republic. Lloyd ab Arfon announced that the ministry of finance (his own ministry) would restructure and refine its work. The ministry of finance, concerned with consumer affairs, central administration, tax issues, public procurement etc will focus a lot less on public sector engagement and redirect to administrative duties. In order to simplify the role of the state in the economy, public procurement will almost exclusively come from ministries other than the ministry of finance. Digital optimization has also allowed the administration to increase its efficiency, thus rendering a lot of workers without tasks.
We will continue to report on the economic state of the federal republic. We predict that this budget proposal will continue to effect the economic landscape for many years to come. This new economic dawn is very unsure. The old dirigiste methods of doing things are changing, and what that means, is uncertainty.
