The government's 2006 basic policy on economic and fiscal management and structural reforms, approved by the Cabinet on July 7, established two national pillars of economic policy for the coming decade -- the pursuit of growth in a shrinking population, and the rebuilding of state finances to reinforce the nation's fiscal sustainability.
To return to fiscal health, it is imperative for both the national and local governments to maximize efficiency and pare expenses. Also, more efforts at revenue reform will be needed to achieve the state's goal of a "primary balance," where expenditures excluding interest payments and debt redemption can be covered by revenues -- excluding bonds -- by 2011.
But it would not be a good idea to resort to tax hikes to secure more revenue.