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[posted 09 November 2004, 12:00]
8
November 2004
Media
Release
FNPF’s future viability of grave concern
The
future viability of the Fiji National Provident Fund has been put
seriously into question with government’s huge borrowings from the Fund
expected to exceed $2 billion by next year.
If the Fund collapses, it will not only cause a
massive financial crisis worse than that of the National Bank of Fiji, it
will result in immense losses and hardship to thousands of workers and
pensioners who have secured their future with the Fund.
The Fiji Labour Party has in the past warned about
this impending crisis raising concern at the Fund’s reckless excessive
lending to government and the risk it has been taking with workers’
funds.
Unfortunately,
no one paid attention to these warnings. The writing has been on the wall
for some years now with falling interest rates to contributors and a
review of the rate of pension from a high of 25% to 15% .
The Fund is seeking to further reduce pension rates
to 10%.
Interest rates have fallen over the years from a high
of 12% to the current 6%.
The Fund’s reserves have been sliding because it
has not been able to build adequate reserves as a result of the low rate
of return from government borrowings.
Some 80% of FNPF’s money is lent to government
either in loans or through bonds and securities. This figure is likely to
rise as government targets the FNPF for further loans to meet the deficit
in its 2005 Budget.
"The amount of government borrowing from the
FNPF has reached high risk proportions and the danger of government
defaulting repayment is always present,” Mr. Chaudhry said.
“Already its borrowing is out of control with a
part of the borrowing now going towards its loan repayments,” he said.
The
government finds itself in a downward spiral of increasing debt and the
only solution it knows is taking on more loans to finance the payment of
old debts. Fiscal restraint
is not part of the SDL’s operating vocabulary.
“This
state of affairs raises a serious ethical issue. What moral right does the
government have to over-commit FNPF funds and put at risk the savings of
close to 300,000 members?” he asked.
Mahendra Chaudhry
Parliamentary
Leader
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