Reality of the matter … Fiji government revenue to drop by $1.5bn; 500 businesses could file for bankruptcy
30 May, 2020, 6:13 pm
Government’s revenue has decreased by almost $1billion this year and is likely to drop by almost $1.5billion in the 2020-2021 financial year, says Attorney-General and Economy Minister Aiyaz Sayed-Khaiyum.
He said if revenue decreased by $1.5b, that would be 50 per cent of the total annual revenue pre-COVID-19.
“And so I wanted to highlight that and going forward, in the worst-case scenario, assuming the borders remain closed for the next financial year, the tax revenue for Government is expected to decline around $1.5b in 2020/2021,” he said.
“Around half the amount we collected pre-COVID-19 so that is the likely scenario around this point in time.”
The A-G also said Government, in the current financial year, had been buffered somewhat by the asset sale of Energy Fiji Ltd to Fiji National Provident Fund (FNPF). He said more than $200 million was injected into government coffers through the sale.
Government’s revenue was drying up as the expenditure was reduced only by $300m to ensure that government services continue, he added.
Mr Sayed-Khaiyum said normal revenue such as Value Added Tax (VAT), corporate tax, personal income tax, Environmental Climate Adaptation Levy, immigration fees and departure taxes had all been affected.
He also said while demand for goods and services offshore remained muted, there were opportunities in the construction sector as it would create jobs from within.
Meanwhile, the A-G also questioned a suggestion by former Reserve Bank of Fiji governor and Unity Fiji Party leader Savenaca Narube for Government to inject $1b into the economy.
He said the question would be where Government would get the money from.
“The reality of the matter is the kind of projections that they are saying, the amount of money that needs to be projected — it would mean that a deficit would get out of whack, now there is no point in saying let’s have a 20 per cent deficit,” he said.
“If you’re going to have a 20 per cent deficit, you actually need to fund the deficit, now who is going to fund that deficit, what will be the funding mix — will it be from offshore. Will it be from onshore.
“And obviously there is a certain amount of money or limited amount of money available offshore to fund the deficits and so, as we’ve stated, this is again a strategy we’ve set.
“In these particular times, our focus is to get funding predominantly from offshore.
“If you get funding from offshore, it also builds up foreign reserves because we’ve seen repatriated funds have become less.”
He said foreign reserves stood at six months of import cover for now.
Mr Sayed-Khaiyum said COVID-19 had impacted global economies and no government ever anticipated this.
“And I really urge everybody, this is not a time to do political point-scoring, this is a time to state the facts, this is a time we need to work together to build the confidence to ensure that we don’t have contracted unemployment and be able to get our revenue levels up much bigger.”