The SDL Government’s Budget 2005 is a doomsday Budget which warns of severe economic problems and tough times ahead for the people of Fiji.
The Budget is finally an admission by the Government of its own failure – a failure of its economic policies, a failure to provide sustainable growth in key sectors.
Finance Minister Jone Kubuabola tabled a record 1.4 billion dollar Budget for 2005 in Parliament on Friday based on a gross deficit of $370 million and raising alarms over government ballooning debt crisis.
The Labour Party expressed specific concern at indications not only of gross financial mismanagement but also at it’s failure to manage the economy satisfactorily as Kubuabola forecast declining economic performance in the years ahead.
Labour’s reaction to the Budget is given in full below:
“Government now admits a substantial mark down in growth in the next two years. For 2005 projected growth has been revised down to 1.5% from an earlier forecast of 4.2%. For 2006, the picture is even more grim with growth expected to fall to 0.7% from an estimated 3%.
This grim forecast is based on a picture of falling exports in key sectors of the economy such as sugar and garments. Garment exports to the US are expected to fall by 30% in 2005 as quotas are reduced, and completely withdrawn by 2006. As a result of this, some 5000 garment workers are likely to lose their jobs.
Government is relying on growth in tourism to sustain the economy. But tourism will not be able to offset huge job losses that will result from the closure of garment factories once US quotas are withdrawn.
Budget 2005 provides no innovative policies to counteract this downturn in the economy.
“We need sustained growth at the rate of at least 6% for the next five years to address the social and economic problems facing our nation,” Labour leader Mahendra Chaudhry said.
“I have been sounding this warning for sometime now… that government’s growth projections were not based on sound economic foundations. I am not surprised to see the Reserve Bank of Fiji statement today that this growth was based on consumer spending and not on sustainable factors,” he said.
“The SDL Government has not been able to deliver on what it promised the nation.
“The people of Fiji, and thousands of garment workers in particular, must now prepare for the shock that will come in 2005-2006. We can only foresee more job losses in the next couple of years, bringing in its wake an acceleration in social problems.
“Fiji must be braced for the danger signals ahead. The SDL government’s tenure in office has been marked by gross financial mismanagement and economic decline, and these are now underscored in Budget 2005,” Mr. Chaudhry said.
The Budget fails to provide any measures that would alleviate the hardship that will result from imminent job losses. There is no reduction in VAT on staple food items or duty reduction on essential consumer products that would lower the cost of living.
A $3 million provision for small micro-enterprise development is grossly inadequate, Mr. Chaudhry said. “Most of this money will simply disappear in administrative costs leaving little for the project itself.”
Nor is government’s 40% investment allowance in agriculture going to achieve much. It would have been far better to allow subsidy on agricultural inputs such as the cost of fertiliser, other chemicals and seeds etc.
The same allowance for the IT industry is also meaningless unless the abysmally high international telephone and internet charges are brought down. High operational costs are the main impediment to the expansion of IT businesses in Fiji.
While Budget 2005 has warned of an impending economic disaster in the next couple of years, it has failed to initiate policies to diversify the economy and offset this catastrophe by other job creating measures.
“Our people must brace themselves for the economic disaster that is now on our doorsteps,” Mr. Chaudhry.