The profit was generated from revenues earned around the second half of 2015, particularly from an increase in Value Added Tax (VAT).
Finance minister Mark Brown said the surplus was the result of increased economic activity including the high number of tourists who visited last year.
The surplus indicated the government was managing well and was in a good fiscal position for this financial year.
Cash reserves amounted to $25 million, a slight increase on June last year. “I am happy to report that we are ahead in terms of a net operation surplus of about $7 million,” Brown said.
“This is the result of more-than-expected revenues generated particularly through an increase in VAT and I guess we can attribute this to the number of people who have been on the island within the six months period from June to December (last year).”
Brown said government’s operating expenditure during the period was less than the $6 million that had been anticipated and budgeted for.
He said this was due to a number of factors.
“One key factor was the cost of the Air New Zealand ‘underwrite’ for this period which was much less than what we had budgeted for.
“That’s a result of a good performance on the Los Angeles to Rarotonga and Sydney to Rarotonga routes. The saving in that particular period was $2.5 million.
“I expect those savings to continue along that trend for the next six months of the year to take this through to the end of the financial year.”
Brown said the biggest impact on the underwrite cost was the price of fuel.
“The cost of fuel has been very low globally and that’s reflected in the lower cost that government has to pay to maintain the underwrite.”
Brown said a number of other expenditures had also been lower than expected, particularly unfilled vacancies in various ministries.
“That was close to $2 million of savings and general operating expenditures across government were lower by nearly $1 million.
“Overall, the operating position of government with operating surplus of almost $7 million shows the very good financial management that the government is adopting. It also shows the good fiscal discipline that is being imposed across all departments in managing government funds.” - AM