Transcript
NEELESH GOUNDER: 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. And what we are also seeing is that debt levels will go close to FJ$5.8-billion.
DOMINIC GODFREY: So debt to FJ$5.8-billion. Is the country set up in a way to meet the servicing of that debt?
NG: So that debt is actually growing and it's one of the factors that is having an impact on state cash flow. Increasingly the government is going to find it more and more difficult to service this accumulating debt over time.
DG: So how is the government filling its coffers in terms of its ability to service that debt - because they're not introducing any new taxes, the people of Fiji aren't necessarily in a position to pay any more taxes - where is that government revenue going to come from?
NG: Well that's a good point and the government does realise that. I think that government revenues cannot increase now. It also does not want to raise any taxes, so Value Added Tax (VAT) in particular is still nine percent and we have not seen any new taxes. So, it will basically be business as usual for government revenue and what we have also seen is that expenditure has grown over the years whereas revenue hasn't caught up. So, this year, what the government has tried to do is to reduce expenditure based on the reduced revenue forecast.
DG: The Economy Minister Aiyaz Sayed-Khaiyum has said the focus is on fiscal consolidation and debt reduction but with that there's also a risk of, again, slowing the economy when there's less stimulation with government revenue.
NG: Surely. I think this is more of a short term reset than a cyclical effect as the Minister of the Economy is trying to make out and I think it's not a deliberate attempt to consolidate expenditure but the government realises that they aren't going to get a higher revenue level this year and that they are reducing expenditure based on the fact that they know revenue forecast is going to be lower than expected.
DG: And there is some chance of more revenue, there is various import taxes that are being increased. Will that have any net effect that will help the government at all?
NG: There has been an increase in the Environmental and Climate Adaptation Levy, an introduction of a 10 percent ECAL on the importation of selected whiteware goods and motor vehicles so the government is going to get some revenue from there, but it has also planned to sell government assets worth FJ$80-million for this fiscal year. So, from these new taxes and the sale of government assets, I think the government is trying to make up for the lower revenue forecast this year.
DG: So how does the budget position Fiji for foreign investment?
NG: Foreign Direct Investment (FDI) hasn't really grown over the years and we have also seen investment remain around 20 to 22 percent of GDP (Gross Domestic Product) from a high of around 25 percent in 2013. So really, taking into account the size of the economy, investment in relative terms hasn't really picked up.
DG: Two big areas that affect people day-to-day in every country, Fiji's not immune to this, health and education. What will the budget do to lift the quality of life for day-to-day Fijians?
NG: Education and health are two key sectors and one of the things the government has tried to do is to bring Public Private Partnerships in the health sector and it has allocated about FJ$34-million for this. At the moment it is still not quite clear how this Public Private Partnership is going to roll-out and what will be the cost if any on the people of Fiji. In terms of the education side, we haven't seen any reforms in this budget that aims to lift the quality of teaching and learning. The government had brought in civil service reforms and open merit recruitment and selection guidelines and teachers are still waiting for their performance-based pay. So, the civil service reforms are not very clear at the moment, so we shouldn't expect much in terms of increasing the quality of output from the civil service as well as from some other areas such as education and health.
DG: Civil service spend, well the running of the government expenditure, is down from FJ$2.7-billion in the previous budget to FJ$2.5-billion in this one.
NG: Yes, that's right. I think the government is realising that is just doesn't have the money or will have the money this year to spend in the way it has been spending in past years. And this is really not a cyclical issue in the sense that it's here now and it's not going to be there next year but it's more of a structural outcome in the sense of the way the wider economy has been managed over the past two years in terms of how the government has been spending money.
