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There economy is likely to become self sufficient with less need to borrow to cater for the deficits in the economy.
It is stated from the facts that the budgetary deficit will exist even if the provincial government stops spending on existing programs. This means that if spending is not reduced the budgetary deficits thus affecting the economy.
However, this system seems defensive in approach. This is because the reality in ground is quite different. The unemployment levels have increased to 12.3 up from 11.5. This increases the need for social assistance. These developments need to be incorporated in the plan. This kind of approach may look good but it does not guarantee economic growth. It only ensures that budgetary deficits do not arise. Additionally, the contribution of the federal government is also shrinking. This policy on reduced cash transfers to the counties may have an effect in the total revenues of the country. This may mean that merely reducing expenditure may not be a solution to the economy.
Option 2 does not seem viable. The economy is not performing well. This in essence means that measures should be adopted to ensure that the economy is robust. Reducing expenditure forecasts by reducing real spending while increasing taxations, is not adequate in creating an economically robust economy. There are other things that must be incorporated into the economy. As much as the main aim is to reduce deficits in the economy, there is also need for economic growth. This cannot be achieved by simply reducing expenses and increasing taxation. The production of the province should be increased. The service sector needs to be buttressed to improve its performance. This means that the government must increase it expenditure to meet this needs. The service sector affected the performance of foreign exports. This can only be remedied if proper steps are taken by the ...Show more
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From the facts it is clear that the expenditure of the government is high. It is also clear that is a low revenue growth. The expenditure of…
Case analysis
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