Analysis of the revised budget (2021-2022) of Fiji
Assignment Report: - Analysis of the revised
budget (2021-2022) for Fiji
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Analysis of the revised budget (2021-2022) of Fiji
Table of Contents
Introduction................................................................................................................................2
Current status of the implementation of the 2021-2022 Fijian National Budget.......................2
Impact Analysis of the revised 2021-2022 Fijian National Budget...........................................3
Economic impact analysis:.....................................................................................................3
Objective analysis:..................................................................................................................4
Political impact analysis:........................................................................................................6
Weakness of the budget:.........................................................................................................7
Comments and Recommendation..............................................................................................7
Conclusion..................................................................................................................................8
Appendix....................................................................................................................................9
Logbook..................................................................................................................................9
Reflection.............................................................................................................................10
References................................................................................................................................11
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Analysis of the revised budget (2021-2022) of Fiji
Introduction
Fiji has recently launched its revised budget for 2021-2022. This budget is important in the
next few months for the country to get out of and prosper after the Covid 19 pandemic.
Therefore this write-up will investigate the state of execution for the original 2021-2022
budget for insights and move ahead to evaluate the effectiveness of the changes implemented
in the revised budget. Secondary research of credible government and reputed organisations
publications will be used for information gathering and analysis. Therefore the research
hypothesis is- "the revised budget of 2021-2022 is effective". The report will analyse and
evaluate the research hypothesis. In the end, comments and recommendations for a better
budget will be mentioned as per need.
Current status of the implementation of the 2021-2022 Fijian National Budget
The 2021-2022 Fijian National Budget was aimed to re-energise the country’s economy after
the Covid 19 pandemic. The budget sought to improve the conditions and make it an easier
task for business in Fiji. The budget took significant steps to accomplish the task of reducing
the cost of business, bolstering investments and continuing some changes in tax laws. One of
the main objectives of this budget was to fortify Fiji’s economy beyond tourism-based
business. The government also took steps to reduce the unemployment rate, providing
financial support for small businesses and the likes & cut government expenditures such as a
non-increase in salary for government officials (Fiji, 2021). Apart from business, the focus
has been on education, healthcare and welfare. The government has been able to accomplish
the objectives listed in this budget but partially. For example, the target to get 80% of the
Fijian population vaccinated by 31st October 2021was not been realised. The government
was able to accomplish the tax law changes but those were not directly related to providing
relief to the common people. This is because taxes such as ECAL persisted and fuel duty was
still in practice making the changes less effective than anticipated. Tax collections decreased
by 50% on the average level. But this did not affect the government expenditures as the
government had to bear the cost of expenses to offset the effects of the Covid 19 pandemic.
Also, it is to be noted that the government went ahead with the measures to reduce
unemployment which was a 2021-2022 National budget objective.
As far as the financial performance is considered, the government collected less tax than
expected. The performance of the government has been better than the budgeted
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Analysis of the revised budget (2021-2022) of Fiji
performance. While the budget proclaimed an 11.7% deficit for the period under
consideration, in the first half of the year, the deficit observed is 5.4% only. This better
performance can be attributed to tighter public expenditure and over-collection of
government revenues (22.9% more collection than expected). Therefore, in the fiscal case,
the performance of the government has been better than mentioned in the budget. The
government was able to collect significantly more in revenues because after the Covid 19
pandemic subsided, the opening up of the tourism industry after December 2021 led to an
increase in business and boosted side industries thereby resulting n better income and tax
payment. The government successfully cut short government expenditures led to a substantial
decrease in capital and operating expenditure for the government by $133.3m & $295.2m
respectively. Other budgetary commitments such as $200m funding support for businesses at
a maximum 3.99% interest rate, up-gradation of hospitals, and $145.5 m in social welfare
scheme allocations are all underway (PWC, 2022). These schemes should be accomplished in
near future. This is the current status of the 2021-2022 Fijian National Budget.
Impact Analysis of the revised 2021-2022 Fijian National Budget
The revised budget for the 2021-2022 financial years has some very important changes that
will have a significant economic and political impact on the Republic of Fiji.
Economic impact analysis:
The revised budget on the whole is supposed to capitalise on the positives from the opening
up of the economy- trade and tourism – after the Covid 19 pandemic. The budget will
expectedly provide relief to the common people and leverage the increase in trade and
commerce simultaneously to provide income for the government as well. The revised budget
has the following key impact highlights to achieve positive outcomes for the economy and its
people:
The minimum wage rate has been increased from $2.68 per hour to $4 per hour in four steps
with the final step having the maximum wage rate. The first increase will be affected from 1 st
April 2022 and the last increase will be affected from January 2023. It is important to note
that measures such as an increase in the minimum wage rate gradually will pump money into
the hands of the common people and boost consumption. The boost in consumption will push
the GDP of the country.
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Analysis of the revised budget (2021-2022) of Fiji
The earlier fuel duty of 20 cents on every litre of fuel has been removed. Value Added Tax or
VAT has been removed for 21 items such as flour, rice, potato and the likes. 15% tax on
expensive products such as white goods, alcohol and tobacco has been levied to compensate
the central exchequer. Removal of fuel duty and VAT on common items will reduce prices
and this will help the common people while the increase in taxes for the expensive items will
draw income for the government. Since these items are not generally purchased by the
common people in significant quantities or are not essential for living, the tax load will not
adversely strain any person in the country (Prasad, 2022).
Fiscal costs such as stamp duty on milk etcetera have been reduced. The reduction of stamp
duties will also enable the business to increase spending on business-related activities that
will boost the country's GDP.
The older ECAL (Environment and Climate Adaptation Levy) has been removed and will be
replaced by the higher Social Responsibility Tax that will help the government to implement
its welfare schemes. Debt till 31 December 2023 has been waived off and 200% deductions
on the rent received for landlords have been made effective. Waving of debt and 200%
deduction for rental income will allow small income group people some space to leverage the
benefits and offer the services at reasonable rates.
Apart from these welfare schemes and education opportunities (medical services have been
made free and funding for TELS and social welfare schemes have been increased) such as
funding for MBBS programmes, free education, $194m unemployment benefit, $7m one-
time payment through social welfare schemes and the likes will provide support to the
common people to achieve professional success and financial security. The long term impact
will be the establishment of a system that will churn out a secure and efficient population
who will take the country forward and help the country to look beyond tourism in near future.
An objective and detailed analysis of the impact of the revised budget follows next in the
analysis section.
Objective analysis:
From the previous discussion on the impact of the revised budget, it is seen that the country,
as well as the ruling party, will benefit pretty well. This is because of many reasons. First, the
budget elements as described earlier will help to control the macroeconomic parameter in a
positive way. That is it will help the country’s economy to surge forward for better outcomes.
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Analysis of the revised budget (2021-2022) of Fiji
Secondly, the budget highlights that the Fijian people will have a government who will look
toward the interests of the common people of the country and help them develop and prosper.
The country had been able to control inflation with the figures being in the negative for the
last two years until the Covid 19 pandemic that created some supply shocks which led to a
crunch in supply during the pandemic. The shortage in the supply of goods led to a price
increase thereby initiating inflation. However, the inflation is around 1.8%. The revised
budget will play a significant role in curbing inflation. This is because the removal of 20 cent
fuel tax will reduce transport costs thereby adversely affecting the price of commodities. This
will help curb inflation led by the price rise. The removal of vat for 21 essential items will
also lower the price of items that are bought by the common people; this will also help in
curbing inflation. These cuts will stifle inflation in the prices of fruits due to seasonality.
Therefore the reduction of taxes on the purchase of staple items and fuel will control
inflation.
The incentives for business will also help the economic growth in a positive way. For
example, income tax holidays for businesses in the tourism sector & customs duty exemption
on the purchase of plants and equipment such as shown below will provide an opportunity for
the sector to recoup after the losses suffered during the Covid 19 pandemic:
Source: (Prasad, 2022)
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Analysis of the revised budget (2021-2022) of Fiji
Other sectors will also get help from the government. The Ministry of Commerce, Trade,
Tourism and transport has dedicated $86.7m for the development of the industries. This will
be used to provide funding for grassroots level entrepreneurship, cooperative businesses and
MSME enterprises. The budget also implements funds to provide skill training and support to
the Fijian people to develop themselves and become employable for the businesses in Fiji.
Individual industries such as the sugar industry have been allocated $83.3m in the budget.
This amount will help the sugar industry to recoup from losses incurred due to natural
calamities such as Cyclone Tody. Apart from these, the budget also proposes to strengthen
the ancillary business through investments in waterways, buildings, environmental
conservation and the like. Therefore the budget is targeted to boost economic activity across
all walks of Fiji. They will boost the GDP of the country and provide economic growth apart
from generating employment through the creation of jobs.
The creation of jobs will be a by-product of the economic growth as dictated by the revised
budget but the unemployment issue that had witnessed lows recently owing to the Covid 19
disruption is also supported for recovery directly through this budget. One time support of
$20m has been allocated for unemployment assistance. The careful allocation of monetary
support like $100 for those in the informal sector and $50 for all others shows that the budget
is a people-oriented budget that contributes to the success of the budget.
Public expenditure has been balanced with the imposition of taxes. This is the main strength
of the budget. Taxes have been lowered for the common people such as for the increased
200% deductions for land rent, sponsorship, maternity leave etcetera and raised for the higher
income class such as through an increase of VAT to 15% for selected items that are
purchased mainly by the well off. In fact, the replacement of ECAL with the higher social
responsibility tax is also a ploy to generate funds for the welfare schemes. Therefore balance
in provisioning relief to the common and drawing from the high-income group is one of the
strengths of this budget. The budget will help in essential imports as customs taxes on items
such as ziplock bags, water bottles etcetera have been reduced drastically from 32% to 5%.
This will reduce the price for home buyers. Couples with this the budget contains increased
spending for public utilities, education and other such sectors thereby providing direct
support for nation-building.
Therefore these are the strengths of the budget as the budget will promote prosperity and
nation-building.
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Analysis of the revised budget (2021-2022) of Fiji
Political impact analysis:
This budget will also have a significant political impact. The revised budget is meant to woo
voters by providing them with economic incentives. The budget is carefully designed to not
only provide economic relief and opportunity to the common people of Fiji; it will also
provide a base for the stabilised economy in 3 years' time when the debt to GDP ratio for the
country will fall below 80%. This along with the social welfare schemes and increasing
opportunities for education will attract voters to vote for the ruling party. This will help the
incumbent party to stay in power. Moves like zero vat on essential items and removal of fuel
duty will reduce prices and help the common people who will vote in favour of the ruling
party. Similarly, the increase in minimum wage will directly appeal to the labour class who
will vote in favour of the ruling party. Therefore the possible impact will be the continuity of
the present party n government (Sharma, 2022). The other political impact will be the
generation of fellow feeling and sympathy among Fijians who will witness the help received
by the government. The impetus for education will also create a consciousness among the
people that they should look for education for a career. Therefore the revised budget will also
politically motivate people to follow the righteous path.
Weakness of the budget:
However, the only visible weakness of the budget is that the budget does not directly
guarantee a better balance of trade. The budget is more directed toward providing economic
and social relief to the people than strengthening the current account deficit. This is because
the budget does not contain any allocations for the support for exports. The economy will
grow and consolidate- this will be the only incentive to control the CAD.
Comments and Recommendation
It has hereby arrived at the fact that the budget s pro-people and balanced. The budget has
adequate incentives to mobilise economic activity through business and trade. The budget
also contains support provisions for the unemployed. The budget has been directed towards
providing economic consolidation for Fiji as it capitalises on the economic upturn after the
Covid 19 pandemic and simultaneously provides developmental opportunities to the common
people of Fiji through education and business support. It is noteworthy that the budget will
help the ruling party stay in power as the budget has been devised accurately to benefit the
people of Fiji and the Fijian economy.
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Analysis of the revised budget (2021-2022) of Fiji
It is hereby recommended that the Fijian government should make small improvements in the
budgetary plans and allocations to provide the necessary support for 100% utilisation of the
available opportunities. It will start by allocating funds to promote industries that export
goods and services from Fiji. Investment in education is one way to increase human capital
that may bring in higher remittances. Although investment has been done in the sugar
industry, the country can still look forward to funding developments in the gold mining
industry and fisheries. These are Fiji's top export sources and will help the company to
increase export. Also, the government should look forward to allocating incentives for
starting large scale vehicle manufacturing as this will help to increase exports and reduce
imports (OEC, 2022). This will provide a budgetary tool to reduce the balance of trade.
Among other elements, the budget should have a specific allocation for the development of
scientific research. This will help to create a foundation for technological excellence that will
help the country to industrialise on large scales in near future. The budget should also have
specific objectives and suitable mechanisms o achieve such objectives such as a mechanism
to control inflation within the target range. The inflation range could be anywhere from -0.5%
to 0.5%. Although the budget has explicit sections on monetary and fiscal policies and a
separate section for inflation, it does not provide any insight into any mechanism to control
inflation over a certain range as mentioned above.
Lastly, the budget addresses sustainable objectives like the reduction of carbon emissions that
will directly address the issue of global warming and other things (Nabou, 2022). The budget
does allocate funds for the ministry of forestry, and the ministry of minerals through different
programmes such as the Emissions Reduction Programme Agreement (ERPA), and the Forest
Carbon Partnership Facility (FCPF) under the World Bank. This programme should continue
and achieve the required objectives. These are the recommendations and comments for the
revised budget for 2021-2022 (Fiji, 2022).
Conclusion
It is hereby concluded that the revised budget is directed to provide economic relief and
welfare for the Fijian people. It addresses people’s and economy’s issues in a better way than
the original budget for 2021-2022. It is to be also noted that the budget under consideration
will consolidate the country's economy in the long run. The budget has a significant positive
macroeconomic effect. However, a small weakness is the lack of an explicit mechanism for a
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Analysis of the revised budget (2021-2022) of Fiji
more positive balance of trade. This can be addressed by increasing export opportunities in
sugar etcetera and reducing import opportunities in the car by replacing imports with
indigenous plants for items such as cars. Therefore the revised budget is a good budget.
Appendix
Logbook
Project - Revised Fijian budget (2021-2022) analysis
Email Phone
Team :
College :
College address:
Teacher :
Mentor :
Student (Role) : 1. (Research &
Analysis)
Log
Date Entries
1/05/2022 Budget documents download: the 2021-2022 original budgets and the revised budget.
3/05/2022 Analysis of the two documents. Points to be used are noted.
7/05/2022 The download of articles and white papers on the revised budget for 2021-2022.
13/05/2022 Analysis of the documents.
15/05/2022 -do-
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Analysis of the revised budget (2021-2022) of Fiji
19/05/2022 -do-
21/05/2022 Interview friends on topic & individual decisions on report format and elements.
22/05/2022
to Report writing.
31/05/2022
Reflection
The assignment provided me with a real-life opportunity to analyse the budget of a country. It
is a first time experience for me. As I researched the topic, I found that a country's budget is
mainly about economic growth and welfare both. The assignment has helped me to gather
insights on how a country may balance its economic growth with social welfare. It has also
increased my research and learning skills as I had to delve into many articles to be clear about
what the budget said. I also had the opportunity to evaluate the political impact of a budget. I
hope that this assignment has developed valuable writing skills for me. This assignment has
given me enough confidence to deal with the analysis of budgets. I am now confident in
budget analysis and look forward to a career as an analyst in the government's ministry of
commerce or finance. It has been an exhilarating and enjoyable experience for me throughout
the execution of this assignment.
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Analysis of the revised budget (2021-2022) of Fiji
References
Fiji, G., 2021. ECONOMIC AND FISCAL UPDATE SUPPLEMENT TO THE 2021-2022
BUDGET ADDRESS. [online] Economy.gov.fj. Available at:
<https://www.economy.gov.fj/images/Budget/budgetdocuments/supplements/
Budget_Supplement_2021-2022_Web.pdf> [Accessed 30 May 2022].
Fiji, G., 2022. REVISED BUDGET ESTIMATES 2021-2022. [online] Economy.gov.fj.
Available at:
<https://www.economy.gov.fj/images/Budget/budgetdocuments/estimates/
Revised_2021-2022_Budget_Estimates.pdf> [Accessed 30 May 2022].
Nabou, S., 2022. Mini budget – Budgeting money and budgeting carbon. [online] FijiTimes.
Available at: <https://www.fijitimes.com/mini-budget-budgeting-money-and-budgeting-
carbon/> [Accessed 30 May 2022].
OEC, 2022. Fiji (FJI) Exports, Imports, and Trade Partners | OEC. [online] OEC - The
Observatory of Economic Complexity. Available at:
<https://oec.world/en/profile/country/fji> [Accessed 30 May 2022].
Prasad, A., 2022. 2021-2022 National Budget Highlights | HLB Fiji. [online] Hlbfiji.com.
Available at: <https://www.hlbfiji.com/2021-2022-fiji-national-budget-highlights/>
[Accessed 30 May 2022].
PWC, 2022. 2021-2022 Fiji National Budget Report. [online] Fijivillage.com. Available at:
<https://www.fijivillage.com/documents/2021-2022-PwC-Budget-Report.pdf>
[Accessed 30 May 2022].
Sharma, D., 2022. Concession budget – Opposition spins back to the drawing boards.
[online] FijiTimes. Available at: <https://www.fijitimes.com/concession-budget-
opposition-spins-back-to-drawing-boards/> [Accessed 30 May 2022].
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