National Economy near collapse: Labour

[posted 26 Mar 2006, 1400]

Fiji’s financial situation is so critical that the economy is on the verge of collapse, Opposition Leader Mahendra Chaudhry has warned.

High consumer spending measured against sharply falling revenue from exports has led to a critical balance of payments situation, and declining Foreign Reserves.

“Our Foreign Reserves are down to dangerously low levels at less than three months of imports. Coupled with this is the fact that the economy can no longer sustain the high Budget deficit and the ballooning national debt situation,” Mr. Chaudhry said.

This is why the Reserve Bank is now trying to control the situation by raising interest rates and mopping up excess funds from the system. But Mr. Chaudhry warned that raising bank rates for loans would put home owners at risk.

“A hike in interest rates will have a drastic impact on home loans. In the next few months we will see a big increase in mortgagee home sales as home owners fail to meet their repayment commitments,” he said.

The RBF is using monetary measures to control the situation. The next two months are very critical. This is why the SDL government is calling an early election.

Mr. Chaudhry said government’s agreement to pay a 4% cost of living adjustment to civil servants and the payment of arrears backdated to January 2003, will put immense pressure on government’s already crippled finances.

The payout will mean additional expenditure of millions of dollars which have not been budgeted for.

“It will lead to a huge Budget blow out. The agreement with civil service unions which cover unresolved issues dating back to 2003, is a blatant move by a desperate government to buy votes.

Same as the announcement that government will pay grant-in-aid teachers – another issue which the unions have been fighting for the past five years.

These are clear cut cases of attempts to influence the voter by brandishing handouts, Mr Chaudhry said.