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Opinion, Opinion

We Must Avoid The Financial Cliff

We Must Avoid The Financial Cliff
Savenaca Narube is party leader of Unity Fiji. He is the former Governor of the Reserve Bank of Fiji and Permanent Secretary for Finance. The views and opinions expressed here in the article are those of Savenaca Narube and not of the Fiji Sun.
September 08
11:00 2018

Government does not gener­ate its own money. It sim­ply uses the people’s money it receives through all kinds of taxes, fees, charges and fines. Gov­ernment also receives grants from foreign Governments, but these are relatively small. The financial laws and regulations require the Government of the day to account to us, the people, on how it spends our money.

I know of two main purposes of government. The first is to improve the welfare of the people through economic and social developments. The second is to build this nation by fostering peace and happiness amongst everyone who call Fiji home. A good government must deliver on both counts. On the first purpose, I read the development plan of this Government where the Prime Minister talked about roads, airports and streetlights amongst other things.

A good government prioritises its spending very carefully, weighing everything carefully. Infrastruc­ture has been a priority of all gov­ernments in Fiji. Many may say that this Government has done better because it has spent more money than any other government on infrastructure. Let me highlight a few issues on this perception.

First, if our government revenue is limitless, Government can spend as much as it has capacity for with­out having to borrow. But we don’t have unlimited revenue. So, the only constraining factor that lim­its government spending is debt. Past governments have been more prudent in their spending than this Government to safeguard our debt position. This Government has ig­nored the debt constraint and has trebled our debt in 11 years. People do not see this mounting debt. They only see the expenditures that Gov­ernment makes and think that life is great. If we cannot pay our debt in future, our children and their families will carry a heavy burden for a long time.

Let us learn from Greece which has taken 10 years to recover from its debt crisis which caused wide­spread damage to the economy and extreme hardship to the people. The debt rescue package for Greece cost over F$700 billion. Fiji with its narrower economic base than Greece is bound to suffer a lot more in a debt crisis.

Second, strong priority is the key to a prudent budget strategy. The main problem that I see with this government’s financial manage­ment is the poor priority of spend­ing. This Government spends a lot on politically popular agendas.

Let us also learn from what is hap­pening in Venezuela which is an oil producer and has one of the big­gest oil reserves in the world. The military leadership which came into power in a coup has brought this country to its knees. The peo­ple are fleeing the country to find food. I fear that we are heading down the same road in Fiji. Our economic management is rudder­less. While this Government is boasting about consecutive eco­nomic growth, this is being driven by its own populist expenditures. If you take this away, the economic growth drops to almost nothing. But more dangerously, debt is com­ing under distress.

Finally, while this Government places infrastructure as its prior­ity, wastage in government spend­ing in this area is high. Some ex­amples are:

  1. a) The wastage in improv­ing existing roads. We all know that the cost of improving the ex­isting road from Nadi Airport to Wailoaloa in Nadi was $42 million per kilometre while the normal rate for a new road would be $3 million. How did the Government manage to spend a whopping $39 million more per kilometre on an existing road?
  2. b) The wastage in repairing existing roads in urban centres. Many can vouch for the wastage in repairing our existing roads in Suva which requires rework a few months after resealing or fixing potholes.
  3. c) The high overheads of the Fiji Roads Authority (FRA) is draining our money offshore. If we look closely at the accounts of the FRA it will reveal the greatest leak­age ever in our history.
  4. d) Why is this Government putting street lights and re-pav­ing existing roads ahead of other pressing needs in housing, medi­cal services, and schools? We know the answer of course. This Govern­ment does things based on its vis­ibility to the people not on econom­ic and social benefits.

Based on my experience, it is crys­tal clear to me that with the com­bination of poor priorities, fast accumulation of debt, and high wastage of spending, we are head­ed for a financial crisis like Greece and even Venezuela. Unity Fiji has the skills and experience to pull us back from the brink of our finan­cial cliff.

Feedback: jyotip@fijisun.com.fj

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