THE adverse effects of the current crisis will be twice or even three times
worse than that of 1987 said
permanent secretary of finance, Savenaca Narube.
While refuting what he termed as overreacted claims by the Public Sector Union,
Mr Narube said
economic growth is now projected to be a negative 15 percent. He said this will
take the economy back
to its position in 1991, saying that more than 7, 000 people have lost their
jobs and the situation will
worsen if there are further trade embargoes, economic sanctions and the deterioration
of business and
investor confidence.
These, he said could easily lead to over 20, 000 job losses and irreparable
damage to key economic
sectors like the tourism and garment industries. He said government revenue
is expected to fall by about
$146 million compared to what was originally forecasted. If spending is allowed
to continue as
originally planned, the budget deficit will rise to around $250 million or nine
percent of Gross Domestic
Product and government debt will exceed 52 percent of the GDP. As a control
measure, he said
government must urgently stabilise its financial position.
"Stability will build a strong foundation to begin the process of recovery
because without stability,
confidence will continue to deteriorate, resulting in widespread job losses,"
he said. Mr Narube said
stability requires government to maintain a prudent policy stance while continuing
to provide essential
services to the people, including health, education, infrastructure, law and
order, and social welfare
support. He said an important part of the stabilisation process is to provide
rehabilitation assistance to
parts of the economy which have been severely damaged by the crisis. This include
tourism, agriculture
and commerce.
Areas which the economy depend on for employment and foreign exchange. He stressed
that
government must reduce expenditure as its resources are at risk because of the
large falls in its revenue.
"With this in mind, the ministry of finance, in consultation with other
ministries and departments, is
carefully reviewing government expenditure, to identify areas where cuts may
be made. "Given that
salaries and wages make up 40 percent of total expenditure, it is inevitable
that they are included in the
review.
"We must always be mindful of the fact that government does not earn revenue,
it just collects it. When others in the community are facing very severe pay
cuts and redundancies, government must seriously reassess its position. Confidence
will be restored by government implementing a responsible policy and not by
being perceived as spending well beyond its means," said Mr Narube.
He said the impact of the crisis has been fully explained to the Public Sector
Union and in the briefing, the unions were presented with two choices. He said
the first choice would be for government to ignore the situation and continue
spending as we intended in the 2000 Budget but the risk of this strategy is
that we could lose control and would be forced to take painful cost cutting
measures in the next few years. When such
extreme measures are required, redundancies become a real possibility, something
that must be avoided at all costs. "Our second choice is to address the
situation now, by stabilising the economy. This will ensure that government
regains control, minimises the many financial risks that remain and when the
situation becomes clearer and move ahead confidently to restore economic growth,"
he said.
Fiji's Daily Post
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