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“Voters, the FFP’s Public Debt and the Poisoned Chalice for the next Minister of Finance” (FT 19/11/2022)

19/11/2022

Fiji voters all know that ruling parties are all too eager to give out freebies, just before elections. It has happened in previous elections, and it is happening again.

            Few voters think about the hidden reality that these freebies are being paid by taxpayers themselves.

            If a Minister for Economy recklessly pays for their current expenditure by borrowing more and more (thereby building up the Public Debt), this must condemn future generations (their children) to pay for today’s lack of frugality by the Government.

            Worse still, a future Minister of Economy will not have the leeway to increase expenditure on necessary items such as roads, water, education, health, and social welfare. On the contrary, the Minister may have to reduce expenditure, in order to bring down the Public Debt to manageable levels.

            That is exactly the case in Fiji today because of Khaiyum’s “management” of Government finances for the last fourteen years.

            I have tried to explain this Public Debt danger in an earlier article, by comparing the different governments of Rabuka, (the late) Qarase and Bainimarama (Fiji Times 29 Jan. 2022) and their Debt:GDP ratios.

            Some readers have said that the earlier article comparing Fiji’s Public Debt to GDP ratios was too difficult to understand for ordinary readers and what it meant for their everyday lives. 

            This article therefore tries to reduce the problem to the household level, with the numbers perhaps a bit easier for ordinary readers to understand but still quite frightening.

            The numbers of households in Fiji have been derived from Fiji Bureau of Statistics household surveys, while the GDP (Income) and Public Debt figures are in current dollar amounts, from the RBF website.

            Because these dollar amounts have not been deflated by the CPI, try not to compare the amounts for one year with another or from Table 1 and Table 2 below. I can assure you that the deflated numbers are even more horrifying, because real incomes of ordinary people have decreased due to inflation.

Average HH Debt and Average HH Income

Graph 1 gives the complete picture of the Public Debt (red line in the graph) rising steadily  after 1992 but far more rapidly after 2007. The it rose sharply to 2020/2021, because the Bainimarama Government refused to tighten its belt during COVID, preferring to borrow even more.

            Unfortunately, the GDP (black line in the graph) collapsed over 2020 and 2021, because of the collapse of tourism and the two curves almost met in 2021.

            Of course, the ratio of Household Debt to Household Income also rose rapidly during this entire period, but far less under Rabuka than under Bainimarama.

Under Rabuka (1992-1998)

Table 1 gives the Average Household Debt and Average Household Income at the beginning of the Rabuka government in 1992 and at the end in 1998.

Between 1992 and 1998, the Average Household Debt rose from $8,739 to $9,048, an increase of only $309 per household (in nominal terms).

            The Average Household Income however rose from $40,521 to $43,091, an increase of $2,570, or almost eight times the increase in Public Debt.   

            Every voter can understand that was an extremely good use of the extra Public Debt or borrowed money as the average household income increased far more than your borrowings.

            Note that the Average HH Debt: Income ratio remained about the same at 21%.  Every voter can understand that the Fiji households were not being burdened any more at the end of the Rabuka Government (1998), then at the beginning (1992).

            Moreover, the Debt of the average household was only one fifth of the average household income- a quite manageable debt by any criteria.

Household Debt and Income Under Bainimarama

There is a totally different (shocking) picture of average household debt and average household income under the Bainimarama Government.

The Average HH Debt rose by a massive $25,486, while the Average Household Income rose from $47,126 to $47,877. i.e. by a mere $1,751, a fraction (7%) of the increase in Average HH Debt.

            Every voter can understand that these massive increases in Public Debt have been basically squandered by the Minister of Economy, and not resulted in the increase in Household Income that could have paid for the increase in Debt.

            Worse, the last column shows that the indebtedness of the average household rose from 36% of Average Household Income in 2007, to 86% in 2021.

            Can you the voter imagine that the current government has borrowed so much on your behalf while adding so little to your average household income to pay off that debt?

            The future generations (you while you are alive, your children and grandchildren) will be paying off this Public Debt which the Minister for Economy publicly called “smart borrowing”.

            Of course, if one looks at the massive increases in income and allowances of the Prime Minister’s household (and that of the other Ministers in the FFP Government), the Public Debt may be “smart borrowing” from their perspective.

            But  it was not smart borrowing for the voters and taxpayers who will be bearing the real burdens to pay off this debt.

The Poisoned Chalice: the squeeze on expenditure

Make no mistake that the next Government that comes in will have to deal with this massive Public Debt.

The previous article had showed that the Public Debt to GDP ratio left by Rabuka in 1998 was only 21% (quite low), that left by the late Qarase in 2006 was 37% (high, but still manageable), but by Bainimarama (or really Minister for Economy Khaiyum) in 2021 was a massive 86% and likely to be higher in 2022. 

            I have pointed out previously that the Public Debt charges MUST be paid BEFORE the Government can allocate a single extra penny to roads or water or hospitals or education or social welfare.

            My previous article had also shown that while Rabuka had about 77% of Government  Revenue left after Loan Repayments, and Qarase 78%, Khaiyum only had 64% of Revenue left in 2020-21, far less able to pay for needed government services, let alone improvements. 

            It is clear that the next Government after the 2022 Elections will have only 64% of Revenue left.

            This will not be enough to repair all the crumbling infrastructure that this Bainimarama Government has presided over in roads, water, hospitals, schools, health services.

            Not only that, but to reduce the Public Debt to manageable levels (around 40% of GDP) the next Minister for Economy (or Minister of Finance) will have to squeeze the expenditure budget even further or try to increase tax revenues, or both in order to try bring down the Public Debt to less than 50% at most.

            But which item of civil service expenditure on wages and salaries will the next Minister for Economy or Finance, try to squeeze?  Can you imagine the angry reaction from the civil servants and unions?

            Which company tax can the Minister of Economy increase? Can you imagine the anger of businesses who have had it so good under Khaiyum?

            Which Value Added Tax can the Minister increase? Can you imagine the anger of consumers when the Cost of Living shoots up?

            I assure you that the next Minister of Economy and Finance will be inheriting a Poisoned Chalice from the current smiling Minister.

            Fiji’s voters are in for a tough time, because of who they voted for in 2014 and 2018 to form government.

            Will the 2022 Elections be any different or will voters be bought again, by freebies?

Post-script to this article:

What is clear is that the Fiji public have become used to an absolutely irresponsible Minister for Economy who does not care about the future generations, and who is quite happy to please current voters, by passing on the burdens of the Public Debt to future generations, whatever pain that may bring.

How has Khaiyum been able to do that? Because there is an ignorant Prime Minister, a former soldier who could not pass university entrance examinations, whose own bank balance (and that of all his family members) has been well looked after by this smiling Minister for Economy, a lawyer without an iota of good economics knowledge or social responsibility, who has been regularly ridiculing a sensible Professor of Economics in Parliament, without any check by his colleagues (even a so-called economist who has been contemptuously moved from pillar to post by Khaiyum).

Why has this ignorant Prime Minister been able to give all these powers to this irresponsible Minister for Economy who has ruined the future of Fiji?

Because there is an equally ignorant Military Council behind the scenes who have backed this Prime Minister so far and done very well themselves, even though Bainimarama once promised (lied) that no military officer will benefit from his 2006 miliary coup.

These pathetic military officers from the RFMF are ultimately responsible for the mess that Khaiyum has made in Fiji- not the egotistical power-hungry and utterly immoral Aiyaz Khaiyum, his pathetic brother at Fiji Broadcasting Corporation, and all their cronies in Fiji and abroad who have personally gained through Khaiyum by happily using the treasonous 2006 coup which removed a lawfully elected Government.

If Fiji’s voters in the 2022 Elections are still not able to understand what the massive Public Debt created by Khaiyum and Bainimarama means for their children and grandchildren, the educated people of Fiji- the accountants, teachers, the lawyers, and all other professional people should all hang their heads in shame, for not doing their bit to educate the ordinary people.

So also should all the police and FRMF personnel hang their heads in shame, as they have also helped to contribute to the climate of fear and ignorance in Fiji.

So also should all the journalists at FBC and Fiji Sun hang their heads in shame, having contributed to the Bainimarama/Khaiyum propaganda for sixteen years.

They will all bear collective responsibility should Bainimarama and FFP return as Government after the 2022 Elections.

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