Page 32 - IB July 2018

Business Intelligence - FIJI

Rein in public sector wage increases, ANZ urges

By Dionisia Tabureguci

A major bank in the Pacific region has recommended that Fiji
put the brakes on civil servants wage increases as a major step
towards bringing the national budget back to balance in the
medium to long term.
In its Pacific Economic Outlook for Fiji released last month,
the ANZ Bank offers an independent analysis on the Fijian
economy, highlighting some weak areas that the Fijian gov-
ernment could look into. Fiji’s total national debt and the need
to bring the national budget back to balance were among the
areas that needed attention.
“Since 1992, the government of the day has run a budget
deficit in all but two years (1998 and 2008). As a result, the
nominal outstanding debt level has climbed. Although this is
not the time for austerity, we would advocate that the budget
be brought back towards balance over the medium to long
term, especially as the interest cost is likely to increase when In the last few years, civil servants have called for what they
the interest rates rise,” the report said. believed was a long overdue rise in salaries and in response,
“History suggests that expenditure close to 30 per cent of government undertook a pay review exercise last year followed
GDP generally yield the smallest budget deficit. With payments by pay increases in various ministries.
as a proportion of GDP estimated at 39 per cent for the 2017/18 Now with the civil service wage bill accounting for almost a
financial year, our view is that expenditure needs to be cut by third of government expenses, the ANZ is cautioning the policy
around 1.5 per cent a year, in order to wind it back to around makers to go slow with the pay rises.
30 per cent of GDP over the next five years. “We’re not saying that the wages should be cut back. We’re
“This includes showing restraint on public sector wage saying that there should be some restraint in wages growth
increases. Public sector employees have received large double because wages growth has escalated over the last two, three
digit wage increases in recent years. We understand that years,” ANZ International’s Pacific Economist and author of
budgets have to balance commitments, deficit implications for the report Kishti Sen told Islands Business.
credit ratings along with political consequences. However, even On Fiji’s debt level, the ANZ Bank noted that total public debt
allowing for some catch ups in wage increases, the hefty wage stood at F$4.85 billion (US$2.32billion) in 2017 - a new high
increases recently awarded appear excessive. The public sector but its serviceability was still manageable, considering that the
wages bill now accounts for nearly a third of total expenditure debt to GDP ratio of the current debt cycle was still lower than
from just over 23 per cent in 2011,” the report said. Fiji’s debt peak in the mid-1990s.

Fiji’s pension fund payout made to individuals, where up to F$2,000 (US$954) per invoice
FIJI’S national pension fund has broken with tradition by de- will not need RBF approval; lubricant, engine oil, hydraulic oil
claring the same interest payout to its members two years in purchase where payments of up to F$100,000 (US$47,738) per
a row. In a statement, the Fiji National Provident Fund (FNPF) invoice may be made directly via commercial banks and foreign
declared a 6.35 per cent interest on members’ accounts for its exchange dealers without requiring RBF approval; and local
financial year ended June 30, 2018, the same rate as last year. foreign currency loans of up to F$2 million (US$954,767) per
This translated to a total of F$289 million (US$137m) compared company per year, which can be remitted offshore at the discretion
to $270m (US$128m) last year. After providing for the fund’s of commercial banks and foreign exchange dealers.
solvency requirements, the flat rate was said to be still reflective
of its “strong financial position.” “The interest declared should be Stop politicising ferry business, says Goundar
reassuring for the members as it continues to reflect the Fund’s “TOO many lies.” Goundar Shipping owner George Goundar made
strong financial position following the FNPF reforms. It is also those comments in response to claims made by the passengers on
very competitive under the current investment climate,” said board the Lomaiviti Princess V which aborted its voyage to Suva
FNPF CEO Jaoji Koroi. and returned to Savusavu after rough seas reportedly dislodged
open a door leading to the bow of the Roll-on Roll-off ferry. The
Fiji relaxes foreign exchange controls vessel carrying more than 400 passengers left Savusavu for
THE easing of foreign exchange controls recently approved by the Suva on a Sunday afternoon last month when crew members
Reserve Bank of Fiji (RBF) has seen five new exchange controls noticed the leak, after one hour of sailing. Confronted with this
put fully in the ambit of commercial banks and foreign exchange by IB Online, Goundar said that was all under control. “It is sad
dealers in the country. These are: the opening of Foreign Cur- that people are politicising the system when we are trying our
rency Accounts (FCA) for film production, now fully delegated best to provide the best shipping services to the people of Fiji,”
to commercial banks and foreign exchange dealers; the opening said Goundar. He also said no compensation would be paid to
of Retained Foreign Currency Accounts (RFCA) with a ceiling of vehicle owners who claimed their vehicles were damaged during
F$100,000 (US$47,738) per company; Advance Import Payments the aborted voyage to Suva.

32 Islands Business, July 2018