Govt exploring options to reduce cost of living, decision expected soon – Prof. Prasad

Govt exploring options to reduce cost of living, decision expected soon – Prof. Prasad

By Rashika Kumar
Wednesday 10/07/2024
Deputy Prime Minister and Minister for Finance Professor Biman Prasad

Deputy Prime Minister and Minister for Finance Professor Biman Prasad says the Government has looked at all options to ensure the cost of living is reduced and the Deputy Prime Minister and Minister for Trade, under which the FCCC comes will make some decision soon.

While delivering his right of reply during the 2024-2025 National Budget debate, Professor Prasad says prices are generally set through market forces in most cases, based on demand and supply and sellers or producers decide the price of their product based on the cost of production, including labour, raw materials, transportation, storage, taxes, and associated costs and based on the level of demand and competition from other suppliers, they decide to put up whatever markup and the final price of the product.

He says the basic principle remains that no one will ever sell the product at a price below the cost of production.

Professor Prasad says the Government can influence the price of any product only to a certain extent, and it can do so in three ways where they can put price controls by changing the level of taxes it applies on these products by producing the product itself or selling it at a loss, like government services, including water.

He says even with price controls and changing the level of taxes, there is only so much that can be done, and there are trade-offs for these decisions.

He further says if the Government reduces VAT from 15 to 9 percent, they will lose $600 million in revenue, where for every 1 percent reduction in VAT, $100 million in revenue is lost.

Professor Prasad asks how can this be compensated and is the Opposition going to increase the fiscal deficit to double-digit and add an additional $600 million in loan but technically, the Government cannot borrow this additional $600 million given the availability of financing.

He says it is easy for some of the Opposition to say that we should reduce VAT without saying how we fix the revenue gap.

The Deputy Prime Minister says when the Government increased the VAT rate from 9 to 15 percent in the last budget, they had done a thorough analysis, explored different options, consulted with various experts, discussed with multilateral lenders, and even brought it for public discussion and did not hide it.

The Deputy Prime Minister also says that all the support provided to the people is going to cost the Government about $750 million this year.

He says all that additional revenue of $600 million the Government is collecting is going to look after our people.

Professor Prasad also says a lot of comments were made that the economy is slowing down, there is no confidence, and investment is not taking place but the economy is not declining; it is growing.

He says they have revised the growth forecast from 3.4 percent to 2.8 percent but it is still growing and there are other commentators who are saying that we may end up with higher growth than that.

The Deputy Prime Minister says they are taking into account the positive impact of the budget on some of the areas which will spur private sector investment and they making sure that they improve the ease of doing business.

He says they are fixing immigration policies and all the other bottlenecks that might be there for investment to pick up in a much bigger way.

Professor Prasad says they aim to raise the growth rate to 4 to 5 percent from the current trend of 3 percent.

The Deputy Prime Minister has also highlighted that contrary to the lies that independent MP Ketal Lal was trying to tell, through the consultations on the National Development Plan, more than 22,000 people from all four divisions were consulted for the 2024-2025 National Budget.

While providing a justification for $5 million for Pacific Polytech, Professor Prasad says all higher education institutions are registered and approved by an independent Fiji Higher Education Commission where Pacific Polytech was registered in 2021 under the former government.

He says Pacific Polytech is doing a good job by replacing the defunct technical colleges that the former government set up and wasted $30 million on.

Professor Prasad says Polytech wanted $9 million but that was reduced to $5 million.

Meanwhile, the Parliamentary Committee of Supplies is now sitting to deliberate on each item in the National Budget which is expected to be passed tomorrow evening.

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