12 Jun 2019

Govt debt drove Fiji budget contraction, economist

3:25 pm on 12 June 2019

An economist in Fiji says reckless government spending means it had to cut expenditure in this year's budget.

Fiji money

Fiji money Photo: RNZ Pacific

Last week's 2019/2020 budget signalled a $FJ800 million reduction, from $FJ4.6 billion to $FJ3.8 billion.

The University of the South Pacific's Neelesh Gounder said despite a record 11th year of projected growth, that figure has been revised down from 3.2 to 2.7 percent.

The government estimates the coming year's net deficit at 2.7 percent of GDP, or over $FJ349 million.

No new taxes or tax increases have been announced.

Dr Gounder said growth in the national debt coupled with a forecaste reduction in government revenue is now having an impact on cash flow.

"It's clear that over the last few years the government has been spending recklessly and that the revenue that is needed to boost expenditure has actually caught up with the government this time around. What we are also seeing is that debt levels will go close to $FJ5.8 billion."

The contraction in the 2019/2020 budget is a reaction to debt according to Dr Gounder and not a result of fiscal consolidation as touted by the Economy Minister Aiyaz Sayyed Khayum.

"The government realises that they aren't going to get a higher revenue level this year and they are reducing expenditure based on the fact that they know revenue forecast is going ot be lower than expected," Dr Gounder said.

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