Fiji's finance minister, Ratu Jone Kabuabola, has handed down a 595 million US dollar budget for next year.
The budget provides for a deficit of 4 percent of the Gross Domestic Product which is an improvement on this year's 7 percent deficit.
But in a shock move, Ratu Inoke has increased the Value Added Tax imposed on all goods and services from 10 percent to 12 and half percent.
This is in stark contrast to the policy of the deposed Chaudhry government which removed the value added tax from basic food, medicines and educational items.
Ratu Inoke says to compensate, the govenrment has increased the threshold at which income tax becomes payable by 500 dollars to 3-thousand and 5-hundred US dollars.
The finance minister has also increased fiscal duty on beer, spirits, cigarettes and tobacco by 3 percent.
The single largest segment of next year's budget goes to education which has been allocated 105 million dollars followed by health which gets 54 million dollars.
The police budget has been increased by one million to 25-point-5 million dollars to take into account security costs for the next year's South Pacific Games.
But the military budget has been reduced by 2-point -6 million dollars to 26-point-4 million.
This figure factors in the withdrawal of a battalion of Fiji troops at the end of 24 years of peacekeeping in Southern Lebanon.
Fiji's tourism industry is expected to lead economic growth and the finance minister has provided an extra 1 million dollars for marketing, making a total of 6 million dollars.
As well, it will spend over 5 million dollars on tourism infrastructure.
Ratu Inoke has deferred a reduction in corporate income tax from 32 percent to 30 percent which he had promised last year.
He has also provided 9-point 5 million dollars for the proposed restructure of the ailing sugar industry and agreed to write off 16 million dollars in loans to the Fiji Sugar Corporation which has made losses of 25 million dollars in the last 3 years.
The minister has increased the sugar export tax from 3 percent to 10 saying all stakeholders in the industry have to pay to revive it.
Cane farmers had called for the removal of this tax saying sugar is the only agricultural commodity on which such a tax is imposed.
The government has also decided to bring back a 3 percent tax on gold exports, saying weak market prices for the metal have improved.
The budget has placed strong emphasis on the economic and social development of indigenous Fijians, with the finance minister saying this is essential for the future peace and stability of the country.
Total foreign aid funds committed to Fiji next year are estimated at over 28 million dollars.
Ratu Inoke is forecasting growth in the Fiji economy of 5-point-7 percent next years which he says is ahead of the govenrment's target of 5 percent.
He says inflation is likely to be subdued at around 3 percent and foreign reserves comfortable.
