Iyer's piece on Budget 2008: his usual lies

[posted 3 Dec 2008, 1500]

The pre-Budget opinion piece by NFP/FT propagandist Kamal Iyer (FT 21/11/2008) is characterised by his usual contempt for truth and objectivity, spurious arguments and a pathetic lack of proper research and information.

An objective analysis of any national Budget requires that it be put in its proper political, economic and social context. This Mr Iyer fails to do! He poses as a critic but must first learn to read a Budget if he wants to establish credibility as a writer.

Mr Chaudhry’s Budget 2007 was delivered against the backdrop of a national crisis: State finances in a precarious position - verging on bankruptcy, increasingly bleak economic prospects following six years of gross mismanagement and lack of direction by the previous government. Critically low levels of Foreign Reserves, a widening trade deficit with rising imports and declining export revenues, rising interest rates and an exploding national debt.

Major sacrifices had to be made and austerity measures prescribed to reverse these negative trends, and rescue State finances and the economy from collapse.

The focus of the interim administration’s revised 2007 Budget, therefore, was to secure financial and economic stability and to lay down a solid platform for fiscal and economic sustainability.

Belt tightening was the key theme – civil service salaries had to be slashed by 5% to cut back on government expenditure, duty raised on a wide range of imported items to reduce the import bill, key export industries had to be revitalised and a concerted effort made to cut back on corruption, wastage and other malpractices in the civil service.

Kamal Iyer claims the Budget “perpetuated the suffering of the poor”. This is utter nonsense considering that one of the first acts of the Interim Government was a humanitarian measure - to rescind the Qarase-imposed increase in VAT to 15%. This would have accentuated the hardship of the poor. Chaudhry’s revised 2007 Budget scrapped the increase, and to provide further relief, exempted VAT on the first $30 of the electricity bill for domestic users and reduced import duty by more than 12% on a range of food items from liquid milk and other dairy products to meat etc.

The revised 2007 Budget also restored the per capita grant for primary school students that was abolished by the SDL government. This measure alone would have provided substantial relief to hundreds of poor school children.

Iyer’s claim that the 2008 Budget reduced the Education and Health allocations is likewise incorrect and stem from his inability to properly read Budgets. The illusion is created by the fact that Budget 2008 removed VAT allocation from all government wages and salaries. This was mistakenly allocated in previous Budgets and inflated expenditure as we all know that VAT is not paid on salaries and wages.

VAT amounted to $24 million in the Education Budget, reducing the overall allocation by that amount, without affecting the actual delivery of education. The Budget also cutback on abuse and wastage, and trimmed administrative costs in the way of phone bills, travelling allowances etc - done across the board for all Ministries. In addition, the education grant to USP was slashed by $2 million.

Despite all this, the total Budget allocation for Education was $296.5 million with an increase in the capital budget of about $1 million, even after the removal of funds previously allocated for grant in aid teachers.

Likewise, there was no real cut in the Health Budget. VAT removal under Health was $5.8 million. Nonetheless, the Health operating expenditure went up to $126m as against $121.7m in 2006. There was an increase of $3 million for staffing and a further $3m for purchase of goods and services. Capital expenditure under Health rose more than $1 million.

Government was very mindful of the need for more funding in the social sector thus the economy achieved in Budget 2008 was through a clampdown on corruption, wastage and abuse rather than at the expense of actual delivery of services.

Again Kamal Iyer lashes out blindly when he moans about the Budget “increasing duty on laptops and computers which are an essential tool for education of our children”. Had he checked his facts, he would have learnt that duty was zero rated for computers and laptops used for all educational purposes.

Likewise, he is misinformed when he claims there was no increased allocation for poverty alleviation and family assistance grants. Family Assistance Allowance was raised from $16 million in 2006 to to $20 million in 2008.

Iyer’s dishonesty is again evident in his claim that “Mr Chaudhry repeatedly refused to grant further relief saying it would have a drastic impact on the State coffers”. This statement is as preposterous as it is false.

As Finance Minister, Chaudhry took the initiative to express concern at rising food prices and moved to provide immediate relief through the Prices and Incomes Board which was instructed to review its price control list and carry out a stringent surveillance of price hikes in shops and supermarkets.

Through newspaper ads the Finance Ministry explained the global crisis caused by rising fuel and food prices and reassured the people of Fiji that government would closely monitor the situation and, if necessary, provide relief through reduced duty on essential food items. This was done in May – it is immaterial whether it happened in his absence or not.

Mr Iyer also moans, again unjustifiably, that Budget 2008 did nothing to cushion the sugar industry should EU support funding for the industry not come through.

Quite apart from a direct grant of $5 million in the Budget, a series of support packages were initiated to assist in the rehabilitation of the sugar industry:

• $2.5m support to maintain the price of fertilisers

• $0.5m to FSC to for maintenance of rail transport

• Rent subsidy for productive farmers with government to provide a 4% capping on the current UCV, raising rent to landowners to 10% of UCV

• A $3 tonne bonus payment to farmers who produce cane above their Farm Basic Allotment - to boost cane production to a targeted 4.3 millions tonnes by year 2010.

Government also scrapped the drainage levy and is working with the industry to reduce production, harvesting and transportation costs to farmers. To encourage diversification and value-addition, the ethanol and Co-generation projects were launched. The mill restructuring and upgrading programme that had been held up for two years was resumed and is expected to be completed before the next harvesting season.

How can Iyer ignore this substantial assistance provided in the past two years to revitalise the sugar industry?

It is plainly evident that Kamal Iyer has one political agenda and that is to distort facts and misinform the people of Fiji. As a newspaper, The Fiji Times has a responsibility to ensure it is not used for the purpose of spreading such disinformation.