The Niue government has been warned that huge cuts to spending are necessary in the next financial year in order for the island to produce a balanced budget.
Early estimates show a deficit next year of 2.8 million US dollars.
Don Wiseman reports.
"Producing a balanced budget is a commitment made by Niue to its main aid provider, New Zealand, but it rarely happens."
In recent years the deficit problems have got worse. In February Niue cut spending, including workers wages, to try and balance this year's budget, but in a memorandum to members of the public expenditure committee, the island's financial secretary, Mike Fleming, has warned of the problems caused by overestimating revenue and under estimating spending.
He says the island has been living beyond its means for years and it must develop an efficient and effective public service and a sustainable private sector.
There are plans to improve the collection of tax and to impose charges on some government services.
The public expenditure committee, which is charged with ensuring that revenue and expenditure goals are realistic, can be expected to demand substantial cuts to the budget for 2007/08. It is to meet this week.