“A LITTLE ECONOMIC KNOWLEDGE
IS DANGEROUS”
A response by Savenaca Narube, Leader of Unity Fiji and former
Governor of the Reserve Bank of Fiji, to the statement of the
Minister for the Economy on economic conditions and projections
No amount of rhetoric by Fiji’s Minister for the Economy who is not qualified to talk on the economy, should deviate us from the argument between facts, economic theories, and predictions. Any rational person would advise the Minister that facts always speak louder than his words.
The only way to test how best his economic predictions are is to compare them with the actuals. And if you do, you will find that the economic projections of Unity Fiji are much closer to the actuals than his projections. Do you know why his predictions are not credible? The main reason is that he has applied his political optimism to the forecasts. This is a no, no, in making projections. In a revelation in Parliament with irrefutable evidence, the Minister had directed the Reserve Bank to review its economic projections to make them look rosier.
The Minister is right that assumptions make the difference in making projections. The main reason why our projections are better than his is that we are realistic in the risks that we believe are out there. These risks are many at this time in our history. Most of these risks lie with the recovery in tourism because of the uncertainty of the CORONA virus. We think that tourism will take 5 years to recover from 2020. The Minister, as always, think that it will recover much faster.
The omicron virus has already thrown spanners into his optimism. The Minister referred to the more optimistic forecast of the ADB and the World Bank. I remind the Minister that these international bodies rely a lot on the assessment of the countries themselves because of our local knowledge. If I was the Minister, I would therefore be very worried if there were wide deviations between his and these institution’s projections.
I remind the Minister that the economy is an interlinkage of the four sectors of the economy. Foreign reserves and liquidity are side effects of the activities in these sectors. Because of these interlinkages, high foreign reserves, and liquidity in Fiji are signs of a depressed economy not a healthy one. There was no need to borrow offshore to prop up foreign reserves. On the flip side, low reserves can be a sign of an active and healthy economy.
I thank the Minister for highlighting our alternative Unity Budget. But he deliberately got it absolutely wrong. We did not cut total expenses but redirected the wasteful ones to ease the people’s suffering, fight the virus and quickly promote the resource-based economy.
Our Unity Budget would have given three times more to the people than his token $360. The economic impact of our strategies would be much higher with the greater impact of government spending rather than the drag of the large wastage that he has allowed. What has his incentives in the last three budgets achieved? Not much!
Why is Fiji caught in a trap of deepening depression, unsustainable debt, higher cost of living and escalating poverty? In my view, it is simply because we have the wrong Minister for the Economy.
Sadly, the people will carry these costs for a very, very long time to come. If the Minister thinks that I do not know what is happening in the financial sector after 35 years in this area and a post graduate degree on the subject, does he think he knows more without any qualification or experience?
I invite the Minister to an economic and financial debate at any time of his choosing.
The only way to test how best his economic predictions are is to compare them with the actuals. And if you do, you will find that the economic projections of Unity Fiji are much closer to the actuals than his projections. Do you know why his predictions are not credible? The main reason is that he has applied his political optimism to the forecasts. This is a no, no, in making projections. In a revelation in Parliament with irrefutable evidence, the Minister had directed the Reserve Bank to review its economic projections to make them look rosier.
The Minister is right that assumptions make the difference in making projections. The main reason why our projections are better than his is that we are realistic in the risks that we believe are out there. These risks are many at this time in our history. Most of these risks lie with the recovery in tourism because of the uncertainty of the CORONA virus. We think that tourism will take 5 years to recover from 2020. The Minister, as always, think that it will recover much faster.
The omicron virus has already thrown spanners into his optimism. The Minister referred to the more optimistic forecast of the ADB and the World Bank. I remind the Minister that these international bodies rely a lot on the assessment of the countries themselves because of our local knowledge. If I was the Minister, I would therefore be very worried if there were wide deviations between his and these institution’s projections.
I remind the Minister that the economy is an interlinkage of the four sectors of the economy. Foreign reserves and liquidity are side effects of the activities in these sectors. Because of these interlinkages, high foreign reserves, and liquidity in Fiji are signs of a depressed economy not a healthy one. There was no need to borrow offshore to prop up foreign reserves. On the flip side, low reserves can be a sign of an active and healthy economy.
I thank the Minister for highlighting our alternative Unity Budget. But he deliberately got it absolutely wrong. We did not cut total expenses but redirected the wasteful ones to ease the people’s suffering, fight the virus and quickly promote the resource-based economy.
Our Unity Budget would have given three times more to the people than his token $360. The economic impact of our strategies would be much higher with the greater impact of government spending rather than the drag of the large wastage that he has allowed. What has his incentives in the last three budgets achieved? Not much!
Why is Fiji caught in a trap of deepening depression, unsustainable debt, higher cost of living and escalating poverty? In my view, it is simply because we have the wrong Minister for the Economy.
Sadly, the people will carry these costs for a very, very long time to come. If the Minister thinks that I do not know what is happening in the financial sector after 35 years in this area and a post graduate degree on the subject, does he think he knows more without any qualification or experience?
I invite the Minister to an economic and financial debate at any time of his choosing.
