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What Budget Means

What  Budget Means
July 01
11:00 2017

Leading chartered accounting firm, BDO yesterday released their Budget brief for the 2017-2018 National Budget.  The breakdown will help you better understand what the National Budget means for your business and your pocket.

BDO, Chartered Accountants, a Fijian Partnership, is a member firm of BDO International Limited.

the Attorney-General and Minister for Economy, Public Enterprises, Civil Service and Communications, Honourable Aiyaz Sayed-Khaiyum, presented the 2017-2018

National Budget today at 7.30pm.

For 2017-2018, the revenue forecast is $3,857.3 million with the budgeted expenditure of $4,356.8 million, resulting in an estimated net deficit of $499.5 million or 4.5 per cent of GDP.

The Minister commented that the Government’s focus has always been to empower Fijians, raise our productivity capacity and unlock our true potentials.

For 2017-2018, the budgeted capital expenditure is $1,779 million.

Government’s debt level for 2017-2018 is projected to be $5,216.1 million (being 47.5 per cent of GDP).

For 2018, the economy is projected to grow by 3 per cent, and 2.9 per cent for 2019.

This resume provides a brief outline of certain aspects of the Government’s Budget for the year 2017 – 2018 and is based upon a quick analysis of the Budget Address.

As this is a general guide, we recommend that you seek professional advice before taking action on specific topics.

We emphasize that the full impact of the Budget will be known after a detailed analysis of the Budget and our firm will issue further reports based upon such analysis.

 

Medium Term Fiscal Framework

The net deficit for the 2017-2018 Budget has been budgeted at $499.5 million or 4.5 percent of GDP. The deficit stems from budgeted revenues of $3,857.3 million and budget expenditures of $4,356.8 million. Government’s debt level is projected at 47.5 percent of GDP at the end of the FY 2017-2018.

 

MEDIUM TERM FISCAL STRATEGY

Government’s fiscal policy will continue to focus on growing the productive capacity of the Fijian economy through sustained investments in infrastructure development, provision of social services and maintaining an enabling environment for the private sector to thrive and drive future growth.

 

The 2017-2018 Budget sets out key policies for the Government to achieve the following key macro-economic targets for the medium term:

  • achieve economic growth above 5.0 percent;
  • maintain investment levels above 25.0 percent of GDP;
  • manage inflation at around 3.0 percent;
  • ensure foreign reserve levels cover at least 4-5 months of imports and non- factor services;
  • maintain the budget deficits at less than 3.0 percent of GDP; and
  • reduce the debt stock to 40.0 percent of GDP.

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REVENUE POLICY

To support the medium term fiscal framework, Government’s revenue policies will be guided by the following principles: Implementing a tax system that is simple, fair and transparent.

  • Maintaining competitive tax rates and broadening the tax base.
  • Modernising tax and customs legislations to provide more clarity in interpretation and application of tax provisions.
  • Adopting best practices in revenue administration.
  • Promoting tax compliance and timely payments of tax dues.
  • Ensuring the benefits of duty concessions are passed on to consumers or targeted beneficiaries; and
  • Providing tax incentives to attract investments that contribute towards the achievement of key policy priorities such as employment and poverty alleviation.

 

EXPENDITURE POLICY

Government expenditure will be guided by the following objectives:

  • Maintain national security, the rule of law and improve access to justice.
  • Provide sufficient resources to facilitate free and fair elections in 2018.
  • Ensure civil servants are adequately remunerated for performance, risk and technical expertise.
  • Increase support for education and health to strengthen Fiji’s human capital and create the foundation for a knowledge-based society.
  • Ensure existing social protection programmes provide sufficient resources to protect the poor against inflationary pressures in the economy.
  • Continue with the implementation of key infrastructure projects, particularly for roads, water and electricity.
  • Support key policy initiatives to protect the environment and mitigate or adapt to the effects of climate change.
  • Provide sufficient reserves for unforeseen events such as natural disasters, including funding for emergency response and recovery.
  • Place greater emphasis on on-going reform initiatives to revitalise the sugar industry and ensure its long term survival.
  • Support key initiatives to boost the performance of primary industries such as agriculture, fisheries and forestry, given their key contribution to poverty alleviation, rural development, food security and export growth.
  • Accelerate key structural reforms in the public sector, including civil service reforms, public enterprise reforms and financial management reforms.
  • Provide sufficient support for the development of micro, small and medium enterprises
  • Promote programmes that facilitate private sector development and employment creation.
    e-Budget Brief 2017-2018 Page 16 2009 Budget Brief

 

DEBT POLICY

Government’s debt policy for the medium term will continue to focus on achieving debt sustainability by reducing fiscal Deficits and adopting sound risk management strategies.

Key strategies for managing debt levels over the medium term are discussed as follows:

  • Reduce deficits gradually to achieve a progressive reduction in the Debt to GDP ratio
  • Create an efficient market for Government securities with the capacity to re- finance maturing debt and raise new finance
  • Develop the domestic bond market to improve liquidity, promote secondary market trading and create new bonds with varying yields and maturity structures
  • Maintain low and stable debt servicing costs, bearing in mind risks associated with foreign exchange fluctuations
  • Minimise external debt vulnerability by utilising callable options for early redemption of long term loans
  • Maintain a stable and affordable debt maturity structure to reduce the burden of resettlement and minimise exposure
  • Develop a vibrant domestic capital market with a diverse range of debt and equity instruments to be considered for future debt diversification
  • Seek opportunities to re-finance expensive debt under concessional loan facilities
  • Reduce reliance on offshore borrowings to lessen exposure to foreign exchange rate risks

Prudent management of contingent liabilities and government guarantees by putting in place rigorous measures to improve the commercial performance of State Owned Enterprise (SOEs) and prevent risky borrowings.

 

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