TORONTO - Ontario's government spending watchdog says there is "significant risk" the Liberals will not be able to eliminate a $4.3 billion deficit next year as promised.

In his fall economic statement two weeks ago, Finance Minister Charles Sousa said he would dip into a reserve fund to ensure a balanced budget in 2017-18.

But the Financial Accountability Office says the Liberals are relying on "optimistic assumptions for revenue growth and program spending restraint."

The arms-length agency says the government's revenue projection is $2.8 billion higher than its estimate for 2016-17, and $5.2 billion higher by 2018-19.

The FAO says the government has a variety of tools that it could use to "temporarily improve" the budget to balance in 2017-18.

But it warns maintaining a balanced budget beyond next year "will likely require additional measures to raise revenues or reduce expenses," which would mean new or increased taxes and cutting government programs.