Government Finances critical, says Labour..

[posted 24 July 2006, 1100]

Government finances are in such a critical state that it has no funds to meet the $9 million civil service COLA payment due next month, Labour Parliamentary Leader Mahendra Chaudhry said.

Government memos have gone to all Ministries and departments telling them to redeploy funds to meet the COLA payment, and to curtail spending.

The Ministry of Health has been told to redeploy $2 million from its capital budget at a time when it needs additional funding to carry out urgent maintenance work and stock replenishment.

About $2.2 million will be cut from the Education Ministry budget, $1 million from the Ministry of Agriculture and about three-quarter million dollars each from the Ministry of Commerce and the Fiji Police Force.

“These cuts will result in poor services to the public. The allocations were approved by Parliament. To redeploy them for other purposes, government should rightly seek approval from Parliament.

“The government has a habit of not budgeting for COLA payments to the civil service so as not to put further stress on its burgeoning Budget deficit which has already reached alarming levels.

“It is a deceptive practice, designed to hoodwink the nation,” Mr Chaudhry said.

He said at a time when government finances were in such a desperate state, it was unthinkable that the Prime Minister should indulge in the luxury of a 36-member Cabinet, with 36 private secretaries.

"I have warned the nation before on the dire state of government finances. The Reserve Bank is resorting to desperate monetary measures to tighten up the money market and mop up excess funds from the system.

All indications are that the situation is getting worse. Our Foreign Reserves have plunged from $991 million in May 2005 to a low of $693 million at the end of May 2006, worth only three months of imports.

The Balance of Payments situation is extremely critical with key exports continuing to show a sharp decline while imports went up 24% in the previous quarter, Mr Chaudhry said.

People should brace themselves for tax increases in the next Budget. This is the price we have to pay for government’s financial indiscipline, Mr Chaudhry said.