Since March this year, Narsey has been sounding the alarm about the imminent risks to our pension fund which the military regime is using as a cash-cow of convenience, with no immediate plans to repay the debt to us.
He also breaks down the statistical rhetoric versus the reality of the picture that the stats paint.
Fiji's economist blasts interim government's budget
Updated December 2, 2009 17:57:35
A leading Fiji economist says figures provided in the country's budget show the country is going backwards. University of the South Pacific economist Professor Waden Narsey says although the military and police have seen their budgets boosted since the 2006 coup, Fiji is actually going to see its GDP decline by two and a half per cent. He tells Bruce Hill that overseas investment has dropped by 50 per cent since the coup, the country is producing less food which means it has to pay for imports, tourism is down by two percent and the government has resorted to borrowing to pay for everything.
Listen to the interview here.
NARSEY: Well the data that has been given out with the budget documents indicates that we are just still going on the downward slide. We have a six-and-a-half per cent decline in GDP in 2007, just about zero percent growth in 2008, and now it is confirmed, that there is going to be about two-and-a-half percent decline at least this year. So when you combine that with the fact that the STID investment fees, the investment board data on the amount of investment that they have approved, it just simply shows a steady downward decline from 2006, as of about just over one billion dollars. It is down to about 400 million dollars in 2008, and we are not being given the figures for 2009.
Now this is only the investment project approved. Whether what fraction of this has been implemented is anybody's guess, because the chances are that most of the foreign investment are on hold, because people are very, very insecure about the climate here.
HILL: Well, what about domestic production? I mean obviously the more you produce in terms of raw materials and food domestically, the less you will have to pay in bringing in terms of exports. How is Fiji doing with growing its own food?
NARSEY: Yeah, well it seems that the data is very clearly indicating that we are going backwards. I mean the sugar output for instance, and that's the key agriculturral output is certainly declining since 2006. It is at record low levels now. The production of other food crops are showing a general downward slide and what is worse of course is that the proportion of total consumption, even those things where we are supposed to be mounting import substitution effort, the percentage being produced locally has been going down. for instance, for rice, for dairy products and even for something like beef. So the real economy is not going and tourism which was a great hope. I think the 2009 arrival figures will be barely below the 2006 arrivals. So despite the very, very large amount being pumped into the market of tourism, combined with the global crisis and all that, that tourism is not going to show any great dramatic growth. All these budgets for the last two or three years always had very, very rosy projections about the future and none of these projections have ever been realised. So why would anyone want to believe the military government's projectiions about what is going to happen in 2010 or 11 or 12.
HILL: Well, if things are going backwards as you suggest, how is the government actually functioning on a day-to-day basis? Where is it getting its money from?
NARSEY: Well, what they are doing basically is they have increased expenditure in two particular areas, especially military expenditure which has gone up by 28 million dollars per year compared to the very healthy position even in 2006, and the police have also gone up with all kinds of ways, and the revenues have not been growing. In fact the revenue has been very, very stagnant in real terms. So essentially what the government has been doing is borrowing. They are going to borrow almost 500 million dollars this coming year. They have increased the public debt as a proportion of GDP, expect to be rising from 2007. I think it is about 52 per cent this year.
The tragedy also is that in the last three years, they have made the terrible mistake of borrowing abroad, which means that there is a larger part of our public debt has been denominated in foreign currency, which has been got to be paid for by export earnings which are not going. So we are looking at problems ahead and really what this government is doing is instead of curbing in their current expenditure and all that, they basically are borrowing and passing the burden onto the next generation.
HILL: How long do you think the government can keep paying for its activities through borrowing? Is there some point at which it hits the wall?
NARSEY: Well, the problem is that they have got a cash cow in Fiji which is our National Provident Fund, which is the only pension fund for Fiji and governments through the Reserve Bank, they have forced the pension fund to bring back all the international investments, which means the pension fund has a real problem on its hands. The private sector is not going, so there is very few bankable projects to lend to in the private sector and so what the essence is to lend to the only other borrower that can lend to which is government. And already something like 80 per cent or more of its loans are to government statutory organisations and it is at a very, very dangerously high level. The IMF has to be warned that they should not be investing any more in government securities. The problem is they are unable to invest abroad. They have to invest somewhere or those funds will lie idle and end up in Europe and it will be a burden on the other interest earning assets they have. The very end of lending to government and the tragedy of course also is the permanent secretary of finance. It is a New Zealand citizen who has been appointed without going through the PSC. He has been made the chairman of the pension fund board. So basically the ministry of finance is going to borrow from the pension fund and you have got the borrower and the lender basically being the same people.
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