We Must Avoid The Financial Cliff

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:
- 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?
- 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.
- 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.
- 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