OPINION: Saving the lives and livelihoods of Fijians
11 July, 2020, 10:28 pm
On behalf of Unity Fiji, I delivered our alternative national budget yesterday. I know that it is not common to have a political party present an alternative national budget.
But we are in unprecedented times. Never before have we seen the quick and global devastation of this virus in the history of mankind.
More than half a million people have lost their lives. In three months, COVID-19 has brought the global economy to its knees. Many countries are already fighting the second wave.
There is no vaccine in sight, at least for the next 12 months.
We, at Unity Fiji, have decided to lead the charge, to be proactive, think outside the box, and cross conventional boundaries in our genuine effort to save both lives and livelihoods.
In my mind, we must work together, not for the sake of politics, not for the sake of our own egos, not for the sake of the next elections, but for the sake of the hundreds of thousands of families that are suffering from reduced or no income at all.
We owe them and their families all the support that we can give them, and we owe them NOW.
Why prepare an alternative budget?
I can tell you that preparing national budgets is not an easy feat. Unity Fiji has decided to prepare an alternative budget for two reasons.
Firstly, we thought that we pull all of our proposals that we have been putting out on how we can combat COVID-19 together into an alternative budget. Secondly, our offer of assistance to Government to help design a roadmap has been ignored.
Many people have asked us: “We like your proposals, but will this Government ever listen?”
Well, we all know the answer to that!
I would like to reveal that some people have told us that they do not like us offering suggestions to this Government.
I believe that their concerns are misplaced. In my view, if we help the Government do the right things, the people are better off.
Alternatively, if Government fails to do the right thing, the people suffer. In my mind, this is not the time to play political games.
It is not the time to withhold contributions for political gains. When hundreds of thousands of our people are suffering, we must all stand up and help.
Are we qualified to
prepare a national budget?
Many will ask whether Unity Fiji has the credentials to prepare this Unity Budget.
The short answer is a resounding yes! What are these credentials?
First, I have prepared many national budgets as the former permanent secretary for Finance. I know the techniques of budgeting.
I know the financial challenges that we face. More importantly, I know, through practical experience, not textbooks, possible solutions to these problems.
I am the only PS for Finance in the modern era who had posted a budget surplus.
Second, as a former Governor of the Reserve Bank of Fiji, I had rescued the Fiji economy in the past two crises – in 2000 and again in 2006.
I know what national crisis management requires which are decisive, bold and quick actions. But, very importantly, I to knew what I was doing!
I therefore, believe that our credentials to prepare this Unity Budget is second to none.
We are also signaling to the people of Fiji especially the youths that we are capable of restoring fiscal stability to the country.
We have the experience, the skills and the knowledge to rescue our beloved country from financial disaster.
In short, I believe that we are fit to govern Fiji.
What type of budget is the Unity Budget?
We obviously do not have the information to prepare a full national budget especially the allocations to Heads of Expenditure.
This Unity Budget is therefore a policy and strategic budget.
First, we set the strategies taking into account the economic and financial projections. Next, we translate these strategies into revenue and expenditure at the aggregate levels.
Lastly, we identify relevant revenue and expenditure measures to achieve those strategies and bring stability into the government’s fiscal position.
The theme of this Unity Budget is “Saving Lives and Livelihoods” under five pillars:
- a) People centered — We must put people first. This Unity Budget is focused on easing the suffering of the people through the budget and not through their own savings. The centerpiece of our people focus is the $1 billion cash support to workers that have been affected by the pandemic. We are also proposing an increase in welfare support;
- b) Innovation — These are unprecedented times. Conventional thinking will not work. A prolonged economic crisis will increase the suffering of our people. The Unity Budget introduces innovation and creativity in finding the solutions to ease the suffering and get us back on our feet as soon as possible;
- c) Support growth — The Unity Budget supports growth through a combination of fiscal and monetary policy measures. On the fiscal front, the Unity Budget allocates $350 million to a capital program with high impact on economic growth. On the monetary side, money supply will rise through quantitative easing which will maintain liquidity and keep interest rates low;
- d) Responsible budget — While accommodating the urgent requirements of this crisis and promoting economic recovery, the Unity Budget is a responsible one. We are stabilising government financial position through new revenue measures and the identification of savings from wastage and non-essential spending;
- e) Reallocate savings — The Unity Budget will redirect government spending of $1 billion away from wasteful and nonessential spending to higher priority areas like health, education, infrastructure, law and order and welfare;
- f) Reduce cost of debt — The Unity Budget proposes measures to reduce the cost of debt by $80m per year.
Summary of measures
The main specific measures in this Unity Budget are:
First, to help share the burden of the impact of the corona virus, the Unity Budget proposes the following:
Reduce minister’s salaries by a further 10 per cent including all allowances;
Reduce MP’s salaries and allowances by a further 10 per cent;
Reduce the salaries of top civil servants from director upwards by 20 per cent; and
Reduce salaries of all other civil servants by a maximum 10 per cent to a floor of $30,000.
Second, we have identified savings from the following areas:
Grants to State-owned enterprises (SOEs) — The government grants to SOEs and statutory bodies have exploded and now stands at over $1.6 billion. We suggest that FRA should concentrate solely on properly fixing our roads and reducing their overheads. We propose halving the grants, saving $800m;
Miscellaneous: There is an allocation of $200 million in miscellaneous (Head 50). The allocation to this head of expenditure reflects poor budgeting and we propose reducing this to below $100m;
Special expenditures — This ambiguous group of spending has more than doubled in the last ten years to $119 million. We propose to reduce this by at least half, saving $58m;
Vehicles — Government spends an average of $30 million a year in leasing vehicles and buying new ones. In my days at the Ministry of Finance, we spent less than $5 million on buying new vehicles. We will reduce this by half and also explore the possibility of reverting to owning rather than leasing vehicles;
Consultancy payments — There was a $2 million allocation to consultancy in the 2019 budget which was for the services of the international public relations company GORVIS. This is a political luxury which we cannot afford.
Recruit locals — We propose to review all contracts of expatriates in the civil service and SOEs to the view of localizing the positions if locals can meet the required attributes. We estimate that this will save $300 million in the medium term.
Zero-based budgeting — We conservatively estimate that the savings from the application of the concept of zero-based budgeting at $500m without any impact on service delivery;
Cost of debt — We will reduce the cost of debt by $80m per year; and
Other savings — We have identified other savings amounting to $60m.
Of the total savings of $1.5b, we propose to plough back $1b to priority areas by allocating an additional $100m to health; $30m to education; $350m to infrastructure; $20m to law and order; and $10m to welfare support. The balance of $500m of savings is used to reduce the deficit.
Third, to restore fiscal balance, we propose the following new revenue measures:
Temporary increase VAT to 12 per cent but exempt essential food items;
Increase marginal tax rate by 10 per cent points and those earning above $100,000 to 35 per cent;
Increase social responsibility tax by 20 per cent points which applies to those earning over $150,000;
Impose a temporary company tax surcharge of 20 per cent points on those companies making super profits based on return on assets;
Increase import duties on all passenger vehicles by 100 per cent. Heavy machinery and trucks are excluded;
Increase excise duties on alcohol and tobacco by 20 per cent;
Increase import duties on white luxury goods by 20 per cent;
Impose 10 per cent NCD levy on all sugar, preservative, and salt-based products, carbonated drinks, and alcohol and cigarettes;
Increase telecommunication levy by 10 per cent; and
Increase fringe benefit tax by 10 per cent.
We estimate that these new revenue measure will provide an additional $430m.
Fourth, to support economic recovery, the immediate focus is to raise demand, provide jobs and pull up the economy. In support of these aims, the Unity Budget proposes the following measures:
Remove the Environment and Climate Adaptation Levy;
Reduce the departure tax by 50 per cent; and
Increase fuel rebate/concessions to domestic shipping and fishing industry.
Fifth, the Unity Budget builds in the sale of $100m worth of shares in EFL in 2021 and $150m worth of ATH shares in 2022. These shares are only to be sold locally.
Lastly, we are also proposing medium term revenue measures that will help stabilize government finance.
The Unity Budget is available on our website, www.unityfiji.com. In the next article, I will provide reasons why our economic forecasts differ from the Reserve Bank’s and explain the fiscal strategies that we have used in designing the Unity Budget.
Savenaca Narube is the leader of Unity Fiji and former governor of the Reserve Bank of Fiji. The views expressed in this article are his own and does not reflect the views of this newspaper.