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'Acting for change’

19 July 2022

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Debt to hamper Fiji’s post-Covid-19 recovery – Neelesh Gounder

Thursday 21 July 2022 | Written by RNZ | Published in Fiji, Regional

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Debt to hamper Fiji’s post-Covid-19 recovery – Neelesh Gounder
Photo: 123rf

Fiji's post-Covid-19 recovery will be a "slow process" due to the debt burden faced by the country, according to University of the South Pacific academic Dr Neelesh Gounder.

"The worst economic crisis [Covid-19] in our history is over, and our recovery is here," economy minister and attorney-general Aiyaz Sayed-Khaiyum announced last Friday. The recovery will see the government spend F$3.72 billion.

But with rising national debt - at almost F$10b or 85 percent of GDP - and inflation rate sitting at just over 5 percent, Gounder said the true impact of the 2022-2023 budget would be known in the next 12 months.

"From this budget, one of the key takeaways is that the household transfers towards inflation mitigation," Gounder said.

"I think that will contribute towards households that have been impacted by the rising prices of goods and services, especially those that are still on reduced hours or still not employed."

Gounder said Fiji had now received cash grants of slightly over $730 million and the budget indicates the important role grants have played in the economy.

He said cash grants had allowed the government to achieve policies or expenditures that it could otherwise would not have been able to afford or achieve.

"I think what this budget basically shows is that the government is in a tight fiscal space and the debt burden has continued to rise."

The budget support, he said, had been framed around social protection and economic recovery.

"It certainly will not be easy given the slowing down of the of the world economy and global and regional challenges and with the given with the given debt level.

The government had described the budget as "prudent, responsible and visionary", and according to Sayed-Khaiyum "creates certainty" for the private sector.

It was projecting the economy to grow by 12.4 percent this year; "its highest rate of growth ever", according to Sayed-Khaiyum.

Likuliku Lagoon Resort in Fiji.
Likuliku Lagoon Resort in Fiji. Photo: Supplied/Likuliku Lagoon Resort

But Gounder said it was "misleading" to make such a claim.

"I don't think you can call it that way because this is 12.4 percent is coming behind a very low base," he said.

"Coming from a very low great naturally and mathematically, we will see a relatively higher growth rate. So I think it's misleading to say that this is the highest growth rate in the sense of achieving any real growth."

Several tax incentives targeted for businesses as well as direct cash help for families have been announced.

One particular initiative that has raised concerns in the opposition ranks is Fijian families with a combined annual income of F$50,000 or less to be provided $180 per child per over the next six months.

It has led to political parties calling it an election "vote buying budget".

A street in Vanua Levu (file photo).
Photo: 123rf

Gounder said on the face of it, some of these policies targeted for the private sector were supposed to supposed to have a positive impact.

"But what remains to be to be seen is how the private sector deals with these new policy changes and whether there is an incentive within the industry to take advantage of those policies."

He said the six-month period in which households would receive direct cash payments for children below 18 years "gels well with the election period".

"And it seems that the government has targeted the whole of the election period."