AN OPINION BY SAVENACA NARUBE
No proactive actions
I find it hypocritical that the Minister of the Economy defended the three-hour debate of the COVID-19 Budget in Parliament and the suspension of the Standing Orders by stating that the people were desperately waiting for the procurement of medical supplies. If every day counted, why did he not use his legal authority one month ago to “vire” funds from any expenditure Heads to purchase essential items? Why did he wait for the Budget when the whole world was shutting down and global demand had already outstripped supply on many of these essential items? Instead, he chose to wait and use his Party’s majority in Parliament to avoid the proper scrutiny of his Budget.
When many of us expected the Government to unite the nation to fight the most dangerous crisis of our lives, we saw dictatorship and grandstanding in the Parliament debate of the COVID-19 Budget. The Government stuck to its old tactic of attacking the proposer of the bipartisan approach. I thought that the Government missed the golden opportunity to show the people that it has the ability to rise to a higher level of leadership and unite the country.
It is very obvious to me that the quality, priority and focus of the COVID-19 Budget suffered because of the lack of a collective effort. Perhaps the most important Budget of our lives was misaligned and confusing. It reminded me of the words of Shakespeare which I paraphrase as, “…full of sound and fury but signifying little”.
Wrong strategy
There were many things wrong about the COVID-19 Budget. Strangely, the Minister opted for an optimistic Budget. He labelled the budget as a “Stimulus Package”. Stimulus only become effective when investor, business and consumer confidence are restored which is some way away.
We are under attack by an invisible virus that continues to kill people around the world. The end is not known. The final impact is not known. The only thing we know is that its impact will be worse than anything we have seen before. And many experts expect things to get worse before they get better.
Our strategy must be to hope for the best but plan for the worst. Tragically, there were no clear pathway to contain the spread of the virus and save lives if things get worse. The price of optimism can be devastating to our families. The United States is a glaring example of how harmful optimism can be. And it is the richest country in the world while Fiji is way down the income rank.
Wrong priorities
The priorities of the COVID-19 Budget were wrong and confusing. The allocation of $40 million to save lives was inadequate. In my estimate, we need at least $300 million to get ready for the worse scenario. The only way to know the spread of virus is to roll out tests. We need more ventilators. But instead of keeping funds in reserves in case the situation worsens, the Minister decided to fulfill political promises to sugar cane farmers to the tune of $50 million. Instead of focusing on saving lives, the Minister allocated significant amounts to non-essential purposes. Instead of securing more revenue, he decided to give away money by converting loans to equity to prop up some loss-making public companies. Instead of cleaning up the wastage in government spending, he took away the savings from the decline in international fuel prices.
The relief measures were inadequate. In these days, $100 or even $1000 does not go very far. There is no relief for those that do not have FNPF accounts. The assistance to small businesses is insufficient.
What is Government’s plan when these small reliefs run out in two weeks and the crisis carries on for another six months? I accept that Government does not have the resources and capacity to fully restore lost wages to everyone. But it must have a plan and it must tell us about that plan.
It appears to me that our Plan B is fasting and praying.
No framework
There was no conceptual framework that tied the whole budget together. Many of the measures that were chosen had unclear economic rationale:
- The best way to save lives is not to reduce import tariffs on essential medical supplies, but allocate adequate resources to the Ministry of Health to cover the virus and maintain all other medical services.
- The best way to provide relief is not to grant general assistance, but give targeted cash grants directly to those affected. A far better option would have been food and utility vouchers.
- Deferring the pain through suspension of payments while helping the cash flow are bound to multiply the impact when the suspension is lifted. A better option is forgiveness.
- Redistribution of income is an important component of relief efforts. The reason given by the Minister for not cutting wages of highly paid civil servants and management of public companies was not entirely correct.
- The types of stimulus lack innovation. They are the same old tax giveaways. Incentivizing supply would have been a more effective option.
Where is the money?
The Minister proudly announced that his stimulus package was around $1 billion. From my reading of the Budget, these are the breakdown:
- $400 million or 40% are from the financial measures through the Reserve Bank and the commercial lenders. These are not free money. The suspended interest payments will be added to the loan amount and, at the end of the day, the borrower pays more. The RBF additional allocation is a loan at 5% per year..
- $420 million or 42% are from tax breaks. Almost all of the tax breaks are aimed at stimulating the economy at the expense of saving lives. Studies have shown that only a very small proportion of incentives given to companies are passed on to the people..
- $140 million or 14% was allocated to the other relief measures including $50 million to FSC. The suspension of Tertiary Education Loan payments and utility bills will have to be paid. Forgiveness would have been more effective..
- Only $40 million was allocated to the top priority of saving lives which is a mere 4% of the package..
Removing the noises and fury around the Budget, the actual cash that Government is giving to the people to survive the greatest crisis of our lives is only $150 million or 15% of the total package. I consider this a tragedy.
FNPF under threat
The regular raids on the FNPF whenever there is a crisis, place the future of the organisation at risk. The FNPF is the biggest financial institution in Fiji. Its assets are greater than all other financial institutions put together. Any financial problems with the FNPF will have significant systemic effects on the entire financial system. The slashing of employer’s and worker’s contributions to the FNPF undermines the reforms that have been achieved in the last twenty years.
More seriously, the Minister appeared to be pointing not only at the members’ personal FNPF accounts, but also at the general reserves of the Fund. This is pouring oil into the fire. The combination of lower contributions, larger withdrawals and the use of reserves, place the FNPF in a precarious position.
Superannuation funds in the Pacific and the world have failed due to political intervention. We must not go down this road. The independent Regulator must step in now to safeguard members funds.
Call for national unity
Obviously, we cannot give what the richer governments are doing. The Fiji Government cannot shoulder this burden by itself. In my view, we can overcome this dangerous threat if we come together to share the load. We must pool resources to find smarter solutions that works for Fiji. We need solutions that makes the economy more efficient and better respond to crisis. We need solutions to streamline government and reduce wastage. We need solutions that create a fair environment for private sector to flourish.
We must mobilize everyone. Traditional structures must be used. Communities must be involved. Civil societies must play a role. Political leaders must come together. Businesses must put up their hands. We must explore regional approaches to the crisis.
We can only come together if the Government of the day invites us to the table. Sadly, the Minister failed to extend the invitations last Thursday. I thought the Director of WHO summed it up succinctly when he said, “COVID-19 reminds us of how vulnerable we are, how connected we are, and how dependent we are.”
It is not too late to still make that call for national unity.