SOCIOLOGIST, Professor Vijay Naidu, says while there are positives to be taken from the 2017-2018 budget announced on Thursday, it has not done much for ordinary people.
Prof Naidu said maintaining the level of spending in the budget — an increased $950 million from the last fiscal year — would not be sustainable.
The budget deficit was listed at $499 million or 4.5 per cent of the Gross Domestic Product and Prof Naidu questioned whether economic activity could increase to offset the splurge.
“It’s incumbent on level of economic activities and our ability to pay up the borrowed money and if you look at our economic sector which generates the wealth of the country, then we have issues,” he said. “Commercial agriculture, particularly sugar, is in a crisis and it has been in a crisis for a number of years. So to what extent we can rely on the sugar revenue is problematic.”
Prof Naidu said the construction industry, an important component of the economy and indicator of economic growth, was facing stoppages because of a shortage of cement.
Economic growth is forecasted at 3 per cent this year — down from 3.8 per cent last year and is expected to drop to 2.9 per cent in 2018.
Professor Naidu said this raised questions of sustainability and the increased debt could be the burden of future generations.
“We are looking at close to half a billion debt and therefore our debt servicing will increase,” he said.
“And then that adds on to the $5 billion (National Debt) so it means that this generation and the coming generations will have to fork this out.”
Attorney-General and Economy Minister Aiyaz Sayed-Khaiyum said in his budget address that the World Bank had cited Fiji’s debt level as manageable, but Prof Naidu said the institution had a stake in making the statement.
“World Bank, International Monetary Fund, Asian Development Bank, these are institutions that give loans (to countries like Fiji) and it is in their interest to say nice things,” said Prof Naidu.
Economist, Dr Neelesh Gounder said the Government’s 4.5 per cent budget deficit would have to be financed through borrowing from local and foreign sources.
“Effectively, this borrowing to fund shortfall will increase the current stock of debt beyond well over $5 billion,” he said.
Dr Gounder said there were no major policy changes to reduce the cost of living, which was recently highlighted in the Tebbutt/Times poll as a major issue facing households.
“VAT on basic food items will always be a burden for consumers, especially low income earners,” he said.
Mr Sayed-Khaiyum had also announced the service turnover tax (STT) would be reduced from 10 per cent to 6 per cent, but Dr Gounder said this was offset by the environment and climate adaptation levy.
“For many businesses, this decrease in STT would not make any difference as the total package of taxes including STT, VAT and Environment and Climate Adaptation Levy (ECAL) remains at 25 per sent since ECAL has increased from 6 per cent to 10 per cent,” said Dr Gounder.
“STT is paid by all consumers who purchase from businesses involving the provision of a prescribed list of services.
“According to FRCA, these businesses fall into 15 categories of service providers.”
Dr Gounder said the minimum wage for unskilled workers that increased from increased by 36 cents from $2.32 to $2.68 would provide some relief, but did not fully adjust for cost of living changes.
“Further this rate is far from increasing incomes to above the poverty line,” he said.
