Christine Rovoi
Suva, Fiji
, July 18, 2020
Fiji’s government has projected a $US 1.7 billion National Budget for the 2020-2021 financial year.
In delivering the historic Budget on July 17, 2020, Minister for Economy and Finance Aiyaz Sayed-Khaiyum also announced a $US 930 million stimulus package to fund the country’s recovery from the impact of the Covid-19 pandemic.
He said that the deficit will be steep – at 20.2%, pushing the debt to GDP ratio to 83.4%.
But the costs of doing nothing were far steeper, Mr Sayed-Khaiyum said.
Restructuring loans
“The government has worked with financial sector to restructure over $US 1.6 billion in loans, freeing businesses and families from mandatory monthly loan repayments,” he said.
He said that 86,000 Fijians had accessed relief payments from their pension fund (Fiji National Provident Fund) in phase one of unemployment benefits and another 26,000 were accessing relief payments in phase two.
“Over F$ 62 million has been paid out to the affected Fijians, with the government stepping in with around F$12 million to top-up accounts to ensure that full payments were delivered to all who qualified.
The third phase of unemployment relief would be funded by the government with another $US 9.3 million,” Mr Sayed-Khaiyum said.
Tax reductions and rebate package
He said that tax reductions, valued at about $US 232 million, “an unprecedented sacrifice.”
“Apart from the reduction in taxes, the government will be working through Fiji Airways to provide the first 150,000 visitors with a once-in-a-lifetime travel stipend of around $US 185 per passenger to go towards tourism packages including flights, hotels and meals and beverages,” he said and announced a recovery rebate package worth $US 28 million to revitalise the tourism sector.
Mr Sayed-Khaiyum said that the move was aimed at filling hotels by creating attractive packages for visitors to escape the pandemic in “paradise.”
“This has the potential to rekindle the immense, far-reaching economic impact the industry has on Fijian families,” he said.
Remittances
Mr Sayed-Khaiyum said that Fiji’s remittances are projected to fall 15% as other economies decline and that foreign direct investment is set to plunge 40%.
The once-thriving garment-makers have seen orders halted and supply chains disrupted.
“Driven by this global fallout, we are now projecting the single largest economic contraction in Fijian history, some 21.7%. Already, 115,000 Fijians – one-third of our workforce – have had their hours reduced or lost their jobs entirely,” he said.
Mr Sayed-Khaiyum said that the government had allocated $US 9.2 million for unemployment relief.
Those whose working days or hours have been reduced are to receive $US 20.40 per fortnight for everyday out of work. Workers who are now only employed three days a week can get up to $US 40.70 every two weeks. Those working only one day a week can receive $US 81.50 and unemployed people are to receive $US 101.90 per fortnight.
Mr Sayed-Khaiyum said that before the pandemic, Fiji expected its tourism numbers to climb.
“We were expecting to welcome a number of tourists that matched the number of Fijians. But with international passenger flights grounded, tourism revenues have evaporated. That is 40% of our GDP lost in a matter of days, or even hours, and the ripple effects have dropped Fiji’s economic activity to its lowest level ever,” he said.
Tourism tax removal
To assist the tourism industry, operators get back on their feet, the government has removed the 6% Service Turnover Tax (STT).
He said that other measures include reducing the Environment and Climate Adaptation Levy from 10% to 5% across the board, removing F$ 100 off the departure tax.
“For the reduced ECAL, the turnover threshold is now F$ 3 million annually, more than double the previous amount of F$ 1.25 million. So, for mid-sized tourism operators and other businesses like restaurants, rental car companies and cafes, ECAL is dropping to zero,” Mr Sayed-Khaiyum said.
Business licence ends
He said that from August 1, 2020, the business license regime will end.
Anyone keen on starting a business in Fiji in the next financial year can complete an “easy, online business incorporation and tax registration and you’re in business.”
Mr Khaiyum said that there is no longer necessary to fork out the money or the time it takes to obtain a business licence in Fiji.
But he said there were some guidance around this.
“Once they have registered with the Companies Office, low-risk businesses (for example, a shoe store) can open their doors and start selling to customers immediately.
“Other higher risk businesses, which involve people’s health, such as restaurants, will need to tick a few more regulatory boxes before starting operations,” he said.
Salary, spending cuts
The government will cut salaries for all Permanent Secretaries, CEOs and Heads of Commissions and independent bodies by 10%, effective from next month.
This does not apply to the legislature and judiciary as they are independent arms of the State, Mr Sayed-Khaiyum said.
He said that in the Covid-19 Response Budget released in March 2020, government ministers had taken the first salary cut of 20%, which would remain through the next year.
“For the rest of the Civil Service, we are not cutting salaries. Pay cuts start with the leadership and that is where the biggest cuts have stopped, because that what leaders do,” he said.
Mr Sayed-Khaiyum said that the government aims to reduce spending: meal allowances from $20 to $10. Instead of paying overtime, the government would give ‘time enough in lieu of overtime.’
“We will be suspending the rural housing allowance and bundled insurance will now only apply to social welfare recipients,” he said.
Other budgetary announcements
The guaranteed price for cane in the final third season will be reduced from $US 39 top $US 32 a tonne.
The data levy, introduced last year and the telecommunications service licensing fee, have been replaced with a 2% revenue-based telecommunications licence fee.
For subsidised customers of Energy Fiji Limited, the first 100 units of power will continue to be discounted through March 31, 2021.
The Fiji Roads Authority (FRA) has been allocated $US 162 million, up from $US 128 million in the Covid-19 Response Budget, with $US 32.4 million for road rehabilitation.
Free education will continue with free textbooks provided. Subsidised transportation to school will be paid by the government.
Free medicine would be paid as a part of the free healthcare access.
Funding to NGOs will continue.
Vulnerable citizens will continue to receive special efforts to ensure they keep pace with others
The government will cut $US 3.7 million across its foreign missions by centralising country accreditation. Missions in Washington DC, Seoul, Port Moresby, Brussels and Kuala Lumpur will be closed permanently.
Instead, diplomatic missions in Geneva, New York, Tokyo, London, Abu Dhabi, Wellington, Beijing, Jakarta, New Delhi and Canberra will expand country accreditation and engage more locally-based staff. For example, the New York Mission will represent Fiji in Washington, which is only one hour away by plane, Mr Sayed-Khaiyum said.
The Fijian Parliament will resume on July 22, 2020 and the Budget debate will begin on July 30.
Christine Rovoi is Pacific Journalist at Radio New Zealand. The above Report and Picture have been published under a Special Arrangement with www.rnz.co.nz
