18 Jul 2020

Fiji govt unveils $US1.7 billion Budget

6:44 am on 18 July 2020

Fiji's government has projected a $US1.7 billion National Budget for the 2020-2021 financial year.

In delivering the historic Budget last night, Minister for Economy Aiyaz Saiyed-Khaiyum also announced a $US930 million stimulus package to fund the country's recovery from the impact of the Covid-19 pandemic.

Mr Khaiyum said the deficit will be steep - at 20.2 percent - pushing the debt to GDP ratio to 83.4 percent.

But he said the costs of doing nothing were far steeper.

"The government has worked with its financial sector to restructure over $US1.6 billion in loans, freeing businesses and families from mandatory monthly loan repayments," Mr Khaiyum said.

The front of Fiji's parliament buildings in Suva.

The front of Fiji's parliament buildings in Suva. Photo: RNZ / Jamie Tahana

He said 86,000 Fijians had accessed relief payments from their pension fund (Fiji National Provident Fund) in phase one of unemployment benefits and another 26,000 were accessing relief payments in phase two.

"Over $FJ62m has been paid out to the affected Fijians, with the government stepping in with around $F12m to top-up accounts to ensure that full payments were delivered to all who qualified," Mr Khaiyum said.

He said the third phase of unemployment relief would be funded by the government with another $US9.3m.

Tax reductions and rebate package

The government said tax reductions have been valued at about $US232 million - which Mr Khaiyum described as an unprecedented sacrifice.

"Apart from the reduction in taxes, the government will be working through Fiji Airways to provide the first 150,000 visitors with a once-in-a-lifetime travel stipend of around $US185 per passenger to go towards tourism packages including flights, hotels and meals and beverages," Mr Khaiyum said.

The government also announced a recovery rebate package worth $US28 million to revitalise the tourism sector.

Mr Khaiyum said the move was aimed at filling hotels by creating attractive packages for visitors to escape the pandemic in "paradise".

"This has the potential to rekindle the immense, far-reaching economic impact the industry has on Fijian families," he said.


The government said Fiji's remittances are projected to fall 15 percent as other economies decline.

Mr Khaiyum said foreign direct investment is set to plunge 40 percent.

He said the once-thriving garment-makers had seen orders halted and supply chains disrupted.

"Driven by this global fallout, we're now projecting the single largest economic contraction in Fijian history, some 21.7 percent," he said.

"Already, 115,000 Fijians - one-third of our workforce - have had their hours reduced or lost their jobs entirely."

Fiji's Finance Minister, Aiyaz Sayed-Khaiyum.

Fiji's Finance Minister, Aiyaz Sayed-Khaiyum. Photo: Supplied

Mr Khaiyum said the government had allocated $US9.2 million for unemployment relief.

Those whose working days or hours have been reduced are to receive $US20.40 per fortnight for everyday they are no longer working.

Workers who are now only employed three days a week can can get up to $US40.70 every two weeks.

Meanwhile, those working only one day a week can receive $US81.50 and unemployed people are to receive $US101.90 per fortnight.

Mr Khaiyum said before the pandemic, Fiji expected its tourism numbers to climb this year.

"We were expecting to welcome a number of tourists that matched the number of Fijians. But with international passenger flights grounded, tourism revenues have evaporated.

"That's 40 percent of our GDP lost in a matter of days, or even hours, and the ripple effects have dropped Fiji's economic activity to its lowest level ever."

Tourism tax removal

To assist the tourism industry operators get back on their feet, the government has removed the 6 percent service turnover tax (STT).

Mr Khaiyum said how tourism operators earned revenue and sought margins had been rethought and reworked to get the industry off the operating table.

He said other measures include reducing the Environment and Climate Adaptation Levy from 10 percent to 5 percent across the board - shaving $100 off the departure tax.

"For the reduced ECAL, the turnover threshold is now $FJ3m annually - more than double the previous amount of $FJ1.25m," Mr Khaiyum said.

"So for mid-sized tourism operators and other businesses like restaurants, rental car companies and cafes, ECAL is dropping to zero."

Business licence ends

From 1 August this year, the business license regime ends.

Aiyaz Sayed-Khaiyum said anyone wanting to start a business in Fiji in the next financial year can complete an "easy, online business incorporation and tax registration and you're in business - it's that simple".

Mr Khaiyum said there's no longer a need to fork out the money or the time it takes to obtain a business licence in Fiji.

But he said there were some guidance around this.

"Once they've registered with the Companies Office, low-risk businesses - take, for example, a shoe store - can open their doors and start selling to customers immediately.

"Other higher risk businesses, which involve people's health, such as restaurants, will need to tick a few more regulatory boxes before starting operations."

A view of the harbour from the hills above the Fiji capital Suva.

A view of the harbour from the hills above the Fiji capital Suva. Photo: RNZ Pacific/ Koroi Hawkins

Govt salary, spending cuts

The government will cut salaries for all permanent secretaries, CEOs and heads of commissions and independent bodies by 10 percent, effective from next month.

This does not apply to the legislature and judiciary as they are independent arms of the State, Mr Khaiyum said.

He said in the Covid-19 Response Budget released in March, government ministers had taken the first salary cut of 20 percent and this would remain through the next year.

"For the rest of the civil service, we aren't cutting salaries. Pay cuts start with the leadership and that's where the biggest cuts have stopped, because that's what leaders do," he said.

Mr Khaiyum also said the government aims to reduce spending: meal allowances from $20 to $10.

He said instead of paying overtime, the government would give "time enough in lieu of overtime; we'll be suspending the rural housing allowance and bundled insurance will now only apply to social welfare recipients."

Other budgetary announcements

* The guaranteed price for cane in the final third season will be reduced from $US39 top $US32 a tonne.

* The data levy, introduced last year and the telecommunications service licensing fee, have been replaced with a 2 percent revenue-based telecommunications licence fee.

* For subsidised customers of Energy Fiji Limited (EFL), the first 100 units of power will continue to be discounted through March 31, 2021.]

* The Fiji Roads Authority (FRA) has been allocated $US162m - up from $US128m in the Covid-19 Response Budget, with $US32.4m for road rehabilitation.

* Free education will continue with free textbooks provided. Subsidised transportation to school will be paid for by the government.

* Free medicine would be paid for as part of the free healthcare access.

* Funding to NGOs will continue.

* Vulnerable citizens will continue to receive special efforts to ensure they keep pace with the rest of their nation.

* The government's cutting $US3.7m across its foreign missions by centralising country accreditation. Missions in Washington DC, Seoul, Port Moresby, Brussels and Kuala Lumpur will be closed permanently.

*Instead, embassies in Geneva, New York, Tokyo, London, Abu Dhabi, Wellington, Beijing, Jakarta, New Delhi and Canberra will expand country accreditation and engage more locally-based staff.

"For example, the New York Mission will represent Fiji in Washington, which is only one hour away by plane," Mr Khaiyum said.

Parliament resumes on 22 July and the Budget debate will begin on 30 July.

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