The Government put itself in the vulnerable position it is in today by failing to prepare earlier for global shocks and using up its fiscal space on recurrent spending instead of development that could have strengthened the economy.
Former attorney-general and economy minister Aiyaz Sayed-Khaiyum said the economic shockwaves from rising tensions in the Middle East, including Iran, could have been better managed if Government had prepared earlier.
“We could actually be going into recession,” Mr Sayed-Khaiyum said.
“What happens in Iran, in the Middle East continues. We don’t have any control over that.
“But we could actually prepare ourselves.”
He said he had warned in October 2024 that Fiji needed to prepare for the possible economic effects of geopolitical instability in the Middle East.
“Not now as a reactive policy measure and say, ‘oh my God, this is what’s happening’ and try and shift all the blame on that.”
Mr Sayed-Khaiyum said governments were expected to provide stimulus during economic downturns by spending in ways that helped keep the economy moving.
However, he said Government now had limited fiscal space because not enough had been spent on development and capital projects that could increase productive capacity.
“Because the lack of expenditure on the capital sector is not in a stimulus. We are a developing country.
“We need to spend the money on development that will provide an increased productive capacity. And that has not happened.”
Mr Sayed-Khaiyum also pointed to the growth of the civil service and the increase in the public wage bill as factors limiting Government’s ability to respond.
He said the civil service stood at about 34,000 employees in 2022, compared with about 38,000 today.
“Our budget spent on paying civil service wages was about $1billion. Today it sits at $1.3billion.”
He said if staff numbers from entities such as the Fiji Roads Authority, Water Authority of Fiji and Fiji Revenue and Customs Service were included, the number of people on the public payroll could be around 42,000.
“So, you see, all of this actually creates a situation where there is very little room for the Government to manoeuvre itself,” Mr Sayed-Khiayum said.
“And that is a problem that we need to address.”
