In the leadup to the coalition government’s 2023-2024 budget, citizens were warned by Prime Minister Sitiveni Rabuka, Finance Minister Biman Prasad, the Fiscal Review Committee and international financial institutions that Fiji’s debt required dramatic measures.
In fact on the eve of the budget, PM Rabuka said sacrifices would need to be made, and that “a painful structural reform of our social and economic system” would be required.
So when the 2023-2024 Budget was delivered by Deputy PM and Finance Minister, Biman Prasad at the end of June, Fijians had been softened up to the idea of impending economic hardship.
Prasad told the nation that nearly 25% of the Government Budget this year will go to servicing debt.
There were some mixed metaphors when it came to Value Added Tax (VAT), with Prasad saying “we have to bite the bullet” on VAT, but that this might prove to be the “magic bullet” in the longer term.
As expected, VAT did increase to 15%, although zero-VAT was retained on 21 items-and another, prescription medicine, was added to that category.
The tax-free threshold was not reduced, as advocated by the World Bank, but feared by many.
The Minister said government will reinstate the allocation to the University of the South Pacific, has increased allocations to iTaukei administration, and re-establish the Public Works Department and Strategic Planning Office. There are signals work permit requirements will be loosened up and that government will be looking at a host of measures to improve the ease of doing business.
Spending allocations for health and education were increased, as were allocations for the country’s failing water infrastructure, although that still feels like the proverbial finger in the dike.
The decision to write off $650 million in student debt is a political imperative—it was a pre-election promise—but has major economic repercussions as that money needs to be found elsewhere.
Opposition leader Inia Seruiratu would not comment after the budget was delivered, saying we would have to wait until parliament debates the bill mid July to hear his view. However his party mate, Faiyaz Koya was critical, saying the budget would do little to stimulate or incentivise the private sector.
Prasad devoted considerable time during his budget speech talking about the economic management of the previous government, acknowledging: “Some people, will accuse me of talking only about the past. But this is not the past. This is our present. As a doctor once told me, ‘90% of a patient’s diagnosis is his/her history.’ Because it is now that we must find the money to fix these problems. It is now that we must find the money to meet our debt servicing payments. Our people’s present and future choices are now restricted by those poor decisions of the past.”
Prasad’s budget speech also gave forewarning on some specific legacy issues it remains concerned about and is investigating; the spending of $120 million on the Walesi national digital platform, and ‘urgent’ legislative changes on Capital Gains Tax, which he says benefited “one taxpayer” and cost the government almost $70 million in lost revenue.
The Minister also flagged future reviews to civil servants pay and benefits, to the minimum wage rates, and revamping of the apprenticeship scheme and the dairy industry.
Parliament will debate the budget from July 10 and given the enmity evident between opposing sides of the house, it’s sure to be a hot debate. If it gets through, the expectation on government to deliver on its promises, and in particular, reduce the risk of leaving our children generational debt, will be immense. To do that, it will need to pull together in genuine unity, put the nation ahead of its own political ambitions, and find a way to stop any white anting of its coalition.
