Answer to Question #211201 in Macroeconomics for Anisha Kumar

Question

Review the last year’s COVID19 supplementary budget of Fiji (available online) and discuss if the initiatives are adequate to mitigate the pandemic. Discuss the drawbacks, and explain how they may be improved. 

Answer 1

From the covid-19 supplementary budget, the initiatives that have been put up are not adequate enough to offer a significant boost to the economy of Fiji. This is because:

• A total of $3.5 billion expenditure has been allocated in the 2019 -2020 budget. This is $300 million less from the original budget. Total revenue has also been revised due to COVID-19 allocations and also to take into account revenue streams that were lower than expected in the particular fiscal period.
• On the revenue front, the total revised revenue has been forecast to be $2.5 billion which is less by $1 billion when compared to the original forecast, hence a deficit .
• The fiscal package under this supplementary budget is not large enough to improve the domestic demand in relativity to the size of economic shock that has been experienced . Thus, the government is using workers' pension savings to provide relief to businesses and also to workers themselves.
• The total targeted spending is $100; million according to the budget but only $10 million is likely to go directly to workers losing jobs as a result of COVID-19.

Drawbacks

Depending on the fast spread of COVID-19 in Fiji, and the extent of travel bans and lockdowns across the region, we see that the economy of Fiji has fallen and might even go into a depression. The budget that has been derived is not likely to fully address the economic dangers that this pandemic is exposing the Fijian economy to. It indicates a fall in GDP in excess of 10%.

It has become difficult to forecast the path towards an economic recovery. The future of the economic sector cannot be predicted.

The only way to improve the economy keeping in mind the above drawbacks, is for the Fijian government to expand its expenditure in order to increase money supply in the system and to enable businesses to thrive and also enable those that have fallen to come back to life. Government spending should also be increased to cater for the allowances of employees and also for the essential services of the citizens.