Here’s the good news. According to the Minister of Finance, Sili Epa Tuioti, the government is not broke.
In “setting the record straight” during an interview with the Sunday Samoan last week, the Minister said the raft of plans by the government to review taxation laws with the view of increasing them – including that menacing V.A.G.S.T - is not because the government does not have any money.
Rather it is in response to demands from members of the public about improved infrastructure. Of course we’d like to believe Sili.
Who wants to live in a country with a government that’s broke anyway?
The obvious question is; how did we reach the level we are at today in terms of our public finances?
Sili offered one explanation.
“There is so much demand for roads and water supply,” he said. “If you have been listening to Parliament then there is a high demand for water supply, road access.”
We understand that. But there is more.
“As you know we are also now increasing the funding of free education which New Zealand had provided money for,” he added.
“Over time the shares of that funding, has decreased so the government has to pick up from there. So really, if we don’t raise taxes, or borrow, where is that going to get us? It’s just going to take our economic development back but we are not broke.”
Well that’s good, isn’t it? It’s reassuring especially coming at a time when fears are obvious about the foreign debt creeping past the $2billion tala mark, which each and everyone of us will have to pay somehow.
Now the Minister would not confirm or deny the figure.
But he confirmed that is now “about 52-53 percent of our G.D.P” which is something we should be worried about.
“I think we need to make a point that historically our public debt as the percentage of our G.D.P is much lower than that, maybe 30 per cent,” said Sili.
“But you know when we have natural disasters like the tsunami, flooding, and cyclones and obviously we need to borrow from the World Bank, A.D.B to rebuild our infrastructure because if we don’t, then it obviously it going to impact on the growth of the economy.”
Sili went on to say that nobody could plan when natural disasters strike.
“We can’t leave our infrastructure in a damaged state. We need to make sure that businesses will be restored very quickly,” he said.
“As the consequence of that, our public debt had increase in recent times. Obviously we had to borrow money for the airport terminal development.”
“There’s always a question of whether we allow our key infrastructure to deteriorate and not do anything.”
The Minister added that the government has made a very wise decision to invest in facilities and infrastructure.
“Obviously the government is always wanting for grant financing but given the cost involved, it’s not very easy to have it all totally funded.”
“It’s one of the reasons why we are looking at the budget to try and consolidate, keep a close eye on how we manage our expenditures.”
“We want to make sure that we create surpluses that will help us to rehabilitate our infrastructure in the event of natural disasters.
“Not only that but we also need to look at a situation that we will be able to fund a lot of our ongoing maintenance from our own budget.”
“A lot of work is going into climate proofing our infrastructure, so we need to raise the level.”
“And unfortunately we can’t fund it from our budget, we have had to borrow that from the World Bank and A.D.B. although the terms are fairly contentious; I wish we only had to build the infrastructure and not to worry about maintenance and rebuilding.”
“But that’s the reason why we are where we are today. We are quite confident that we can bring that down to 50 per cent, which is to me it will be quite good.”
“If we are too ambitious, then obviously it’s nice to say that oh, our debt is gone down to thirty percent forty percent but the question is; is that practical? Is that realistic? I don’t think so.”
Lastly Sili said the government has sufficient monies for its plans.
“We need to review our expenditures. We did promise that we will be reviewing our expenditures in health and education sectors.”
“We just have to make sure that we are spending them on the right areas and we are getting value for that money. It’s the same with all of our expenditures.”
Well that’s good to know.
Keep in mind this is what Minister Sili said. It’s the official line.
There is always the official line, the unofficial line and then there is the truth!