FIJI’S GROWING DEBT TOPS $1.4 BILLION

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FIJI’S GROWING DEBT TOPS $1.4 BILLION

SUVA, Fiji (Fijilive, June 25) – Fiji's Finance Minister says the Government will continue to borrow although its debt level is well over the accepted international standard.

Ratu Jone Kubuabola told Fijilive.com that the Government still needed to borrow to cover capital expenses and this would in turn generate income.

But, economists are concerned that the national debt is spiralling out of control.

Much of the Government's borrowings have been to cover operating expenses, especially to fund salary and wages of government employees.

Associate professor at the University of the South Pacific Biman Prasad said it would be "very worrying" if the Government did not take the current situation as a warning.

Ratu Jone confirms that Fiji's high debt of FJ$2.6 billion [US$1.4 billion] is hovering at 52 per cent of GDP [Gross Domestic Product].

The international benchmark is 40 per cent of GDP.

There are also concerns that much of the Government's borrowings have been from the savings of workers at the Fiji National Provident Fund.

Ratu Jone told Parliament this week that the Government owed the Fund FJ$1,611,954,108 [US$919,000,000], which accounted for more than half the total funds the Fund has.

Dr Prasad warns the debt would become unsustainable with implications for the national pension fund if the current rate of government borrowing continues for the next five years without an accompanying annual economic growth of five to seven per cent.

"As in the past we are always trying to restrict our borrowing to cover capital expenditure," explains Ratu Jone.

"We can reduce the deficit by ensuring we contain operating expenses, increase revenue through taxation and compliance so that there is a lot more of our revenue which are surplus to try and fund some of our capital expenses.

"So that's the approach we will be taking. We are quite mindful of where we are. It is not as worrying as some people portray. It is something that we will have to manage properly."

"We need to get the economy growing much more than we have at this point.

"That's the Government's intention to raise it to about five percent. So that is what we are looking at - how we are going to manage government finances and debt in the next five years.

"Revenue has been quite buoyant - in the first five months it was about $25m more than what was expected.

Ratu Jone said the challenge now for the Government was to spend within its budget allocation that was approved by Parliament last November.

"We will try and meet certain payments by the end of the year from the budget already allocated so we don't come back to the House for additional appropriation," he said.

"We are not chasing a runaway debt. We can manage it. Most of that is domestic debt not overseas."

June 26, 2006

Fijilive: www.fijilive.com

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