The Reserve Bank’s recently released monthly Economic Review for April shows an alarming picture of economic contraction well before the impact of the COVID-19 pandemic.
The situation is bound to get much worse. The April review provides data on a year on year basis to March 2020. Fiji’s first reported case of the coronavirus was on 19 March, indicating that the worsening economic situation as shown in the April Review was not due to the pandemic.
Figures released by the RBF in its March and April reviews show a deeply contracting timber industry with Pine production down 35-40% on an yearly basis, woodchips 27% (March) and sawn timber about 30%.
Cement sales were down 17% in April compared to 9% the month before while bank lending to the building and construction sector for April declined by 23.4%.
New car sales in the April review had slumped by 31% and second hand vehicles were down 58%. Compare these with the December review figures – new car sales down 26% and second hand car vehicles down 21%.
Banks new consumption lending were down 6.3% for the period in April compared to a 12% decline in the March review.
New investment lending in April had shrunk by 17%. VAT collection in April was down 19%.
Excess liquidity in the banking system is exceptionally high. It stood at $723.5m on 29 April compared with $615.2m on 27 March – excess liquidity indicates a drop in investment and consumption (imports).
The downward revision of revenue and expenditure by $1,729m and $1714m respectively in the 2019-2020 Budget (including the COVID-19 Budget) is proof of the precarious state of government finances which, over the years have been surviving on heavy borrowings.
The rescue measurers now put in place are coming at enormous cost to the nation and the people.
There is little doubt that State finances have been grossly mismanaged under Economy Minister Sayed-Khaiyum.
Estimated Revenue and Expenditure figures in the Budgets presented by him between 2015 and 2019 were cumulatively overstated by $2,547m and 2,729m, respectively.
The fact that the practice of padding the Budget continued each year without being corrected, gives rise to suspicions that it may have been a deliberate act to paint a false picture of exponential increases in revenue and expenditure to signify continuing economic growth.
The padding practice was finally put to an end (thanks to the IMF) in the 2019/20 Budget which was slashed by $811m (expenditure) and $744m (revenue) vis a vis the 2018/19 Budget.
But by then government finances had reached a precarious state.
Following the impact of COVID-19, the Budget was slashed yet again by $984m (revenue) and $304m (expenditure).
The Economy Minister has put the nation in dire straits. In a well functioning democracy, he would have been given the boot long ago but it seems here it is acceptable for a particular Minister to survive even if his actions lead to a total collapse of the national economy.