Time for new economic ideas - Why won’t the Government listen to alternative views?
by Honourable Professor Biman Prasad, NFP Leader
Opinion piece published in the Fiji Times on:
Saturday 6th March 2021
The Economy Minister has said that in the 2020/2021-year, Government will borrow to pay for operational expenditure, including salaries of civil servants. This is not surprising.
The 2020/21 projected annual expenditure is $3.6 billion. Of this, almost $1 billion is for civil service pay. Another $1b is to repay debts. This means that there is only $1.6b for everything else.
This is why the Government has no “fiscal space” to deal with emergencies such as cyclones Yasa and Ana. So, forget about providing support to those affected by the economic impact of COVID-19.
The Government needs to come out clearly on its financial position. What are its plans on further borrowing? And how does it intend to use its loans?
Only a full, transparent and accountable account of the state of the economy will allow a meaningful discussion and way forward.
We have called for an economic summit many times in the past and again more recently. We need to bring people together, to work out a way forward, to build confidence and to unite the people towards a common and known strategy.
The Fiji First Government must come out of its cocoon and engage with others – especially with those who have alternative ideas about how to fix the problems we have.
In the last session of Parliament, I called on Government to focus its recovery strategy on education, health and income support to the needy.
Instead of focusing on these, and support for the victims of cyclone Yasa and Ana, the Government rushed through bills to establish a special corruption court and to remove assessors from the justice system.
There were no Ministerial statements on education, social welfare or deteriorating health facilities. The NFP was not allowed even to ask questions about Savusavu Hospital.
It is well known that when you have a serious economic crisis - like the one that we are going through now, where demand in the economy is depressed - you need policies to create demand.
How do you that? Simple economics will tell you that you put money into the pockets of the people who have lost jobs, who are struggling to make ends meet, who need support for education and health needs.
What did this government do? It brought down a Budget that reduced duties on luxury items.
Why would you want to put money into the pockets of the rich by reducing duty on luxury vehicles and other goods?
Why would the government restrict access to tertiary education now? Before the 2018 General Election, they opened the gates to tertiary institutions by increasing support through TELS.
During a serious economic crisis, the last thing you do is to cut expenditure on education.
Government’s decision to restrict TELS to students in different areas makes no sense.
Additionally, all those students who have marks between 200 and 250 in form seven will not receive any support. Many of their parents will struggle to use their FNPF - many of them may have already exhausted it.
Those who have lost jobs, those who have graduated and have not found jobs, would naturally want to study more and further their education, retrain or re-skill themselves – this is the time to do it.
But Government is denying all these people access to education. This is one of their most ridiculous policy decisions.
There are serious problems within the education sector. They have festered on for the last 14 years. Successive Education Ministers and Government have refused to set up an Education Commission or an independent committee to look at what is wrong with the policies that have been implemented over that time.
On health, we have successfully contained COVID-19 from further community transmission. But our health facilities are in a shambles.
Under this Government we now have the worst health services in the history of this country. The much-touted public-private partnership to build Ba hospital and partner with Aspen lies in disarray.
There is now no news on how and when Ba hospital is going to open.
Facilities for kidney dialysis remain in limbo. The best the Minister for Health could do in Parliament was to deny anything was wrong in the health system.
But health centres and small hospitals are physically in bad repair. Many of them do not have basic medicine supplies.
There is overwhelming evidence of that - yet the Minister of Health goes to parliament and says that there is no shortage of medicine.
At least his Permanent Secretary is more honest and admits that there are shortages of medicine in hospitals.
Many rural dwellers, poor families and those out of jobs rely on public hospitals and health centres for basic medical care and medicine. This is the one time we must, as a country, ensure that our public hospitals have basic facilities and medicine.
Everyone knows that the economy had taken a hit prior to covid-19 because of failed government policies.
The economy contracted by 1.9% in 2019. The recent poverty analysis based on 2018-19 (well before COVID-19) shows an increase in the poverty rate to almost 30% from the previous survey in 2013/14.
If we take into account the estimated 20-25% of the people who are just on the margins of the poverty line, we can easily see that most of them would have fallen below the poverty line after COVID-19. This means that we are looking at a possible poverty rate of as much as 50%.
The government needs to wake up to this reality.
What did Government do to support those who have lost jobs, have had salaries and wages reduced and small businesses that have lost income?
They just did the usual. Opened the taps of the FNPF and asked people to help themselves.
Worse, they asked employees to subsidise the employers. They passed a law allowing the Government and other employers to reduce the FNPF contribution from 10% to 5%.
Who was this really to help? The Government of course. If you cut FNPF contributions by 5% on a billion-dollar salary bill for civil servants, you save $50 million!
Then Government asked the employees to help themselves by reducing their own contribution from 8% to 5%.
So altogether, not only are unemployed people taking out their contributions faster.
Those with jobs have had the money going into their FNPF cut by more than half. So, their retirement funds will shrink.
Many small businesses, especially in Nadi, are either closed or are struggling to stay afloat. According to Ministry of Commerce concessional loans amounting to $23.5 million have been approved to help about 2,500 small businesses. This is not enough.
Government needs to focus its effort in helping these businesses further. Many of them also provide employment to people. About 80% of those employed in this sector are in small operators and businesses. Many of these entities are struggling if not already closed.
The last budget was essentially hijacked by big businesses and the rich. They got support in terms of duty reductions on luxury goods, FNPF reductions and laws to get rid of employees without any reasonable compensation.
While the official inflation rate is low, it does not show the high costs of food and utilities.
For example, in the last Budget, government imposed a 20c per litre tax on fuel when world crude oil prices were falling. Since then there have been three successive hikes to the price of fuel.
So, motor spirit now costs people $2.13 per litre. Other fuel products have risen in cost.
Now that world fuel price has risen, contributing to significant increases locally, it is only fair that the 20 cents per litre extra duty is immediately removed.
It is the duty of any Government to pass on the benefits of any price reduction to the people as part of its social obligation.
But for 10 months now, this government has extracted extra revenue by imposing duty due on low fuel price.
The current “budget consultations” are really a farce. It is an opportunity for the Government to gloss over problems and try to talk itself out of the mess.
As I said earlier: “This is a Government that talks a lot about transparency and accountability.
Transparency requires it first to give us the real facts about the state of our economy.
Accountability is about listening and responding to those we are supposed to serve, those who participate in our economy – the people”.
Professor Biman Prasad is a leading Fiji economist and the leader of the National Federation Party. The views expressed in this article are not necessarily those of The Fiji Times.