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Review budget, says Expert

Tuesday, January 16, 2007

THERE is a need to review the budget to ensure that the accounting for the expenditure and revenue implications of the coup are catered for, says an expert.

Economist from Australian National University Doctor Satish Chand said the review of the budget would also cater for the priorities of the interim government.

Dr Chand said once the budget is reviewed the interim administration would then be judged by the population on progress it makes on its own promises as stipulated in its own budget.

Dr Chand said the reduction in the VAT and a slowing economy is likely to rake in less revenue than what had been forecasted in the November Budget.

"Expenditure is likely to have gone up due to the increased outlays on soldering and security operations since the coup," said Dr Chand.

Dr Chand said the interim administration would need to think of the means of meeting the shortfall between revenues and expenditures.

The proposed increase in Value Added Tax from 12.5 to 15 per cent was put on hold by the Army regime in December last year.

The 2007 budget which was tabled in parliament last November, worth $1710.8m, was 10.5 per cent higher than the 2006 budget.

The Economic Recovery Group headed by Reserve Bank of Fiji governor Savenaca Narube is expected to look at other avenues to recover the lost revenue.

Dr Chand said poverty reduction must be given highest priority since more than a third of the population is already in poverty and more are falling into poverty as the economy continues to slow down.

He said faster growth of the economy is the only route to lowering poverty on a sustainable and sustained basis. Dr Chand said the immediate challenge for the RBF is in being able to protect foreign reserves without dampening domestic demand any further through interest rate increases.

"It is critical that interest rates and inflation rare kept low so as to induce greater private investment," he said.

Question sent to Interim Finance minister Mahendra Chaudhry were not answered

Mr Chaudhry had said cabinet would decide to amend or throw out the 2007 Budget as its meeting today (Tuesday).

Mr Chaudhry said Cabinet will decide to have completely new budget or whether to retain the 2007 Budget and make variations.

"If Cabinet disagrees with the Budget then a totally new budget will be made," he said.