Frontline public services will need to become more efficient, the First Minister has warned.
A fundamental reassessment of spending commitments will be required as Northern Ireland seeks to meet £128 million cuts imposed from Westminster, Peter Robinson added.
This does not include almost £400 million of separate spending reductions.
Mr Robinson said: "The result of this reduction is that local departments will need to make savings, although these should come from reductions in bureaucracy and administration costs in the first instance, frontline services will need to become more efficient.
"However the scale of the challenge means a fundamental assessment will also be required of the services provided by Executive and the best form of delivery."
Meanwhile, Finance Minister Sammy Wilson addressed the final stage of the Budget Bill at Stormont.
Mr Wilson said the spending proposals of departments should be set out clearly in publications to enable their proper scrutiny, and highlighted the departments of health and education.
"An expenditure line of over £1 billion should be unacceptable to this Assembly," he added.
"It is time the Assembly demanded greater transparency with expenditure split over the different spending programmes."
He said the financial process was lengthy, convoluted and repetitive.