“Fiji’s Public Debt Nightmares and the Sleeping Monitors: Part I” (2 Dec 2016)
Fiji’s Public Debt and the Sleeping Monitors: Part I
Now and then international news talks about some countries, like Greece, struggling horribly with their Public Debts, with their inability to pay those who have lent money to them in the past, their humiliation in begging the European Union to bail them out, and even leading to elections and changes in government.
Could Public Debt ever become an issue in Fiji?
Even with full information, it is difficult for even experienced economists or accountants to understand a country’s “public debt”, how it is being created, how it is being paid, who is supposed to be controlling it, who is supposed to be monitoring it, and what the consequences are for current and future generations.
When governments are secretive and refuse to give what ought to be public information to the Auditor General or Parliament, then Public Debt can become a nightmare.
There are so many variables, and imponderables, and questions:
Definitions and methods
There are fundamental disagreements between countries, organizations, economists and accountants about many aspects of “public debt”, to give a few:
* does the “government” also include all public enterprises and local governments?
* How should you define “gross deficit” and “net deficit”?
* Should public asset sales or purchases be included?
* Should “cash” or “accrual” accounting be used?
How government use the borrowed funds and how they pay for the debt
* what if the borrowing has been to pay for man-made financial disasters
* what if huge infrastructure projects are implemented wastefully with unnecessary profits being made by middlemen and contractors?
* what if the burdens of government revenue are not shared equally in society?
* what if the benefits of government expenditure are not shared equally?
Uncertainties about the future
* what happens to debt burdens if the economy grows poorly?
* what happens to debt burdens if the economy grows healthily?
* what happens if governments have borrowed too much from superannuation funds holding the savings (and pensions) of current and future generations
* what happens if governments have borrowed internationally where interest rates rise in future, or Fiji’s exchange rate depreciates relative to the currency borrowed in?
* what happens if large amounts of debt coincidentally become due in any particular year?
* What happens if the public are totally disinterested in what is happening to the public debt, which they pay for?
The answers to these questions (and there are many more), all help decide the current and future implications of public debt.
Who watches public debt on your behalf?
Fiji taxpayers ought to ask: who exactly monitors government on Fiji’s Public Debt?
There is a “Public Management and Cash Flow Committee” of the Ministry of Finance with representatives of the Reserve Bank of Fiji.
This Committee uses a standard Commonwealth Secretariat software to produce what I would expect to be comprehensive reports about risks to Government (there is also another useful UN software):
* is Public Debt becoming too high, relative to GDP and Government revenue?
* is the proportion of public debt to foreigners rising dangerously, subject to increased risks for Fiji given expected export revenues?
* is the balance between short term and long debt appropriate?
* what are the increased risks of interest rate and exchange rate changes?
* may there be cash flow problems ahead because some principal repayments on some loans may increase suddenly?
* will the Public Debt become extremely burdensome should the economy not grow as expected?
* will raising taxes in the future to pay for public debt reduce economic growth rates (as some academic studies suggest)?
There are also all kinds of warning indicators which the debt software monitors and reports on: such average rate of interest on public debt relative to rate of growth of GDP, Gross National Income, Exports, the Net Present Value of the Public Debt relative to Government Revenue.
When I wrote to the civil servant with direct oversight on Fiji’s Public Debt (Mr Isikeli Voceduadua) for the most current report, his reply (presumably directed by the PS Makereta Konrote, a new appointee) was that I would have to “formally write to Permanent Secretary of Economy stating reasons for such data request”.
This professor of economics is well known throughout Fiji for writing community education articles on important economic issues affecting the country and taxpayers.
Why would civil servants, whose salaries are paid by taxpayers, demand to know why a professor of economics wants to read reports about Fiji’s Public Debt burdens?
This is yet another symptom of the horrible decay of ethics and public accountability of Fiji’s civil servants, who refuse to readily give what ought to be public information to the public who are affected by their decisions, and who pay their salaries.
No doubt, and understandably so, they are afraid for their jobs given that their masters are totally vindictive and unaccountable to society.
But that is why countries also become banana republics- because civil servants stop being servants of society, and become lapdogs of their ministers.
Usually elected parliamentarians would have on questioned government behalf of their voters, but the Bainimarama Government refused to call elections between 2006 and 2014.
Since 2014, some opposition parliamentarians, and especially Dr Biman Prasad, a professor in economics, have made critical comments, which are contemptuously ignored by the Bainimarama Government.
We know that visiting IMF, World Bank and ADB missionary teams sometimes give advice to Fiji governments, unfortunately never made available to the public.
The Reserve Bank of Fiji has now begun to publish comprehensive statistics on Fiji’s public debt, debt amortizations and interest rate payments (see the latest RBF 2016 Quarterly Review, Tables 45, 46 and 47). Unfortunately, however, there is no comprehensive analysis of the data in a way that the intelligent member of the public can understand.
The Reserve Bank of Fiji, once upon a time, used to give critical and independent, and often public advice to Fiji governments. But not any more, with senior RBF staff preferring to make public pronouncements on safe innocuous topics that do not endanger their jobs.
University academics used to do critical analyses, once upon a time. But not any more. Most, with the brave exception of Dr Neelesh Gounder, are cowering under their current oppressive managements.
What a pity.
Like the National Bank of Fiji disaster, you won’t know what you have got till it is gone (in the words of one of my favorite singers from the 60s, Joni Mitchell.
[Part II coming tomorrow, 3rd November 2016].