#header-inner img {margin: 0 auto !important; #header-inner {text-align: Center ;} Fiji Coupfourpointfive: Narsey dispels myths of regime's 'record' foreign bond

Thursday, March 10, 2011

Narsey dispels myths of regime's 'record' foreign bond

When failure is called success, while they dig our hole deeper
By Professor Wadan Narsey

The Military Government has announced with great fanfare that their “roadshow” in Hong Kong, Singapore and London, had successfully raised F$500 millions in foreign bonds to pay off $300 millions on a foreign bond raised in 2006, with the remaining F$200 millions allegedly being set aside for capital projects (The Fiji Times, 10 March 2011).

Khaiyum claimed with joy “This is a clear indication of the level of confidence that investors in the international market have in Fiji’s economic development and progress, ongoing reforms and future prospects”. What rubbish!

The Permanent Secretary Finance, Filimone Waqabaca (left), said the Government was happy to “showcase” the ANZ bank internationally (really?) for supporting Government in difficult times (but what did ANZ put in, and what will ANZ get?).

Waqabaca also made many euphoric and supporting statements for the bond conversion with dubious economic logic.

The Acting Governor of the Reserve Bank, Barry Whiteside, safely noted that foreign reserves will be boosted by the new borrowings, and hopefully suggested that FNPF might even benefit. Perhaps, but only for a short while.

All in all, if the media are to be believed, the bond conversion appears to be a great successful WIN-WIN venture for the Khaiyum/Bainimarama Government and Fiji, doesn’t it?

Yes, it is a success for Bainimarama and Khaiyum - because they have managed to pass the buck to the future generations.

And Bainimarama and Khaiyum are digging Fiji’s future generations deeper into the Public Debt hole, with a higher proportion now denoted in very scarce foreign exchange. Meahwhile they turned down a less costly but more sensible loan from the International Monetary Fund (IMF).

Failure to pay the US$150 million bond

Why did we borrow this F$500 million in the first place?

Because the Military Government was unable to repay the US$150 million bond undertaken in 2006, whose local value rose to F$300 million after the 2009 devaluation.

Why cannot they repay?

Because the Bainimarama Government refuses to cut recurrent expenditure, especially the bloated military budget, in order to achieve the level of fiscal surpluses needed to repay that US$150 million bond.

So the magical Bainimarama/Khaiyum solution for the debt you cannot repay: borrow again to repay that $300 millions!

AND to make it worse, borrow even more (another US$100 million) so as to pass on an even bigger burden (US$250 million) to the future generations.

But why did this Military Government not borrow the US$150 million or US$250 million from IMF at a much lower interest rate?

Because the IMF would also have required them to reduce their recurrent fiscal expenditure to manageable levels, and probably there were other conditions too difficult for this incompetent regime to implement.

Higher interest, higher public debt, now owed in foreign exchange
How can you call successful, the conversion of a bond which was originally costing us 6.875 percent interest, into a bond now costing us a higher 9% interest?

AND to borrow overseas another US$100 million ($F200 million) also, to be repaid at a higher 9% in foreign exchange, when its domestic borrowings from FNPF was at a much lower 6% at the margin?

The repayments on this F$500 million bond will also have to be in foreign exchange, which the Fiji economy has great difficulty in earning. We may have healthy reserves now, but that is largely a result of the total lack of domestic investment and stagnant domestic incomes and demand.

Our export earnings can only rely on tourism, water, gold and fish exports.

The sugar industry’s net foreign exchange earnings are not only lower because of the destroyed industry, but also because FSC itself owes large amounts overseas, which have now also been shouldered by the Fiji taxpayers, courtesy of the Bainimarama Regime.

With the devalued Fiji dollar, the increase in foreign debt will increase the burdens on taxpayers who are already being squeezed by FIRCA struggling to increase revenues in a stagnant economy, while facing higher inflation.

Should we devalue even more in the future (God forbid), the burden on Fiji’s tax-payers of this US$250 million bond, will be even higher.

False capital investment justification

How misleading of Khaiyum to claim that the extra $200 millions borrowed will not be used for recurrent expenditure but for capital investment.

That statement would have been true, had recurrent expenditure been at the appropriate lower level.

That statement would have also been true, had the Military Government not already wasted hundreds of millions in all its badly managed projects such as at FSC and other contingent liabilities which are going to come home to roost, sooner or later.

Make no mistake, the extra $200 million is being borrowed to maintain the bloated Bainimarama Regime’s recurrent budget. That capital expenditure Khaiyum talks about would have been incurred in normal times, any way.

ANZ and international confidence in Fiji?

Contrary to Khaiyum’s claim, the financing of this bond is not an indicator of broad investor confidence in Fiji.

As the data from the Fiji Bureau of Statistics and RBF clearly show, the Fiji economy has been badly failing the real test of confidence in the economy for the last four years: private sector investment has been less than 7% of GDP and has dropped to around 3% currently, when it should have been around 15% to 20%.

These bond buyers are merely confident that Fiji has enough foreign reserves to repay the interest and principal when it becomes due.

What about ANZ? Of course, ANZ has some excellent investment initiatives in Fiji with have much growth potential, such as its call and data-processing centres.

But ANZ must have made their cut out of this deal? What percentage of the bonds did ANZ buy?

And if the ANZ's Norman Wilson (left) was so confident in the Bainimarama/Khaiyum management of the Fiji economy, why didn’t ANZ International lend Fiji the whole US$250 million?

Will ANZ now expect future tax and other benefits from a Military Government which was so grateful to have on its “road-show” a multinational bank whose representative
“Wilson was able to give its side of the story” on the Fiji economy, and convince the other bond buyers? What Fiji story did Wilson, indeed, give?

The Reserve Bank and FNPF

Of course, the Reserve Bank will now have some higher reserves, for a few years, until the debt become due again, when it will all go, and they might need even more.

Of course, FNPF might benefit if it is able to invest some of its funds off-shore. But these funds can be forcibly brought back anytime the Reserve Bank wants.

And any benefits to us FNPF shareholders, will of course, be paid for by all the tax-payers of Fiji, of whom FNPF shareholders are only a part.

The PS euphoria and justification

It is extraordinary that the PS Finance, Waqabaca, is reported to have said that his emotion at the bond sale was “one of elation, we were overjoyed, we were happy with the outcome”.


Happy that after the Bainimarama Government failed to repay the old debt, happy that the public debt and burden on tax-payers was being further increased, happy at the significantly higher interest rate we taxpayers will be paying?

Waqabaca claimed that they borrowed overseas because they wanted to “avoid a crowding out effect whereby Government does not restrict private sector demand for domestic finance”.

But “crowding out” only occurs if the available domestic finance was already being fully used by the private sector, which might indeed be “crowded out” if government barged in offering higher interest rates.

The reality has been that domestic investment demand has been so low for five years that the financing institutions (private banks as well as FNPF, FDB and Home Finance) have been desperate to lend their cash to anyone credit-worthy.

As for not wanting to “increase domestic interest rates” - well, were interest rates to rise, the biggest beneficiary may well have been FNPF, which has for decades been a captive lender to Government at low interest rates, much to the private banks’ relief.

This while higher domestic interest rates would provide the appropriate discipline on the uncontrolled borrowings by this reckless Military Government.

Civil Servant Coup Collaborators

If Khaiyum and Bainimarama tried to reduce recurrent government expenditure in order to repay the 2006 bond, they would have faced resistance from the civil service and especially the military officers and rank and file whose support has been bought by grossly inflated salaries, promotions, appointments to higher civil service positions, and other perks.

This damaging bond conversion into a bigger Public Debt allows Bainimarama and Khaiyum to avoid the flak that would come from painful fiscal discipline today, while thoroughly enjoying their party in the meantime.

One can therefore expect the public relations spin from Aiyaz Khaiyum who is on a personal fairy-tale roller coaster ride, playing around with hundreds of millions of dollars of Fiji tax-payers’ funds (not his own or his father’s, as Indians say), trotting around the globe at tax-payers’ expense, feted and supported by sycophant prominent members of the business community, who naturally also get the benefits they want.

But Fiji’s tax-payers should not be receiving an unnecessary PR exercise and faulty economics from civil servants like Waqabaca, who ought to know better.

One of the tragic consequences of the Bainimarama coup has been that inexperienced civil servants without any depth of knowledge or experience, have been rapidly pushed up the ladder into enormously powerful positions, where they are easily misused.

In their gratitude to their Masters for the rapid promotion, so many civil servants (mostly indigenous Fijian), have been prepared to enthusiastically spout all the rhetoric and public relations spin, justifying the decisions and policies of this illegal Military Government - whether it is the Pillars of the Charter, the supposed grand electoral reform, or this foreign bond conversion which is going to be so damaging to the future generations.

Assisted by a censored or pliant media, these civil servants also thereby irresponsibly encourage the public to swallow all the spin- hook, line and sinker, and be totally lulled into a false sense of complacency and well-being.

The Fiji “road-show” indeed, goes on, while our future slowly erodes.


kaicolo56 said...

I hope at least some people in Fiji will see through the junta's spin - or will have a chance to read Dr Narsey's excellent analysis. One of the dailies commented in the days before censorship that the regime was doomed to collapse under the weight of its own incompetence. Today, the green thugs are the only ones preventing that from happening. But sooner probably rather than later the money will run out. But the debt will still be there. We're now borrowing at 9 per cent to pay debts acquired at 6 per cent - with another 100 or so million to keep the squaddies sweet. We expect that from the crooks at the top - but shame on you Waqabaca. You won't be forgotten.

Stealth. said...

Money Matters.

Interested in Prof Narsey's view on
the Kings Wharf missing $200 million? Also ballpark estimate on ammount regime has lost in overseas aid etc since they came into power?

Anonymous said...

Well said Dr Narsey, just reminded one of that Rap “It’s a Crime” by Ali Campbell:


350 million dollars a day
are debts that our kids are going to have to repay
and the problem it isn’t really going away
it’s a crime, and a mess, what a shame!

Don’t do that in my name
you don’t have my support
to play out your mindless wargames
with the weapons that we bought
now there’s a thought

should we continue to contribute to a cause that is obscene
you know our taxes are financing this murdering machine
you know what i mean?

the many many lives that are taken away
we all got to live with that from day to day
and the problem will never ever go away
it’s a crime, and are ways, what a shame


So if you must vote for people who are hellbent on making war
and don’t you be surprised when they come knocking at your door
to even the score

the many many lives that are taken away
we all got to live with that from day to day
and the problem will never ever go away
it’s a crime, in the west, what a shame!

TheJoker said...

What a mess I only hope Bai lives long enough to see the consequences of his sttupidity. The ass ole.

Natty Dread said...

Ali G got me thinking too about some of the widsomd of Bob Marley:

Rise O fallen fighters, rise and take your stance again, He who fight and run away, live to fight another day

Get up, stand up Stand up for your rights Get up, stand up Don't give up the fight.

Emancipate yourselves from mental slavery. None but ourselves can free our minds?

No bullet can stop us now, we neither beg nor will we bow neither can be bought or sold.

Anonymous said...

Long live Ratu Josaia Voreqe Bainimarama to see the result of your dictatorship.
Shame on you.

Mo Jo said...

Professor Narsey has exposed the pot holes in yet another flawed master plan by Sayed Khaiyum.

The road show is indeed a ploy to pull the woool over our eyes, to blind us to generations of debt.

Regime desperate to appear viable and credible in face of tanking economy and disenchanted populace.

Dr Narsey helps shore up the fight for democracy and I agree with the questions put by Stealth.

can the good Prof please have a look at these? They are two that continue to allude us.

Anonymous said...

People of Fiji should just stop complaining and acept whatever Khaiyum wants to do - Stand up and fight back like those in Libya, Egypt and Tunisia if you have any guts if not just shut up and accept what is coming to you.

Anonymous said...


Anonymous said...

Funny the army can't touch or interogate Wadan while other pple speaking out against the regime are hauled up to QEB! May be Wadan's connection to the international community scares the daylight out of the Bai/Aiyarse! Kon roki Wadan....!

Jake said...

This joker is renowned for quoting outdated statistics.

Now who can trust this fellow he is no longer credible.


Anonymous said...

Great comments by Narsey. Unfortunately the idiots in charge have not a care in the world about what Fiji will have to pay in the future. They're too busy helping themselves to the money and are pretty confident their own kids will be rich when this debt hits the rest of our kids.

Poaka said...

Why can't they print this in the Fiji Times? It does not appear to be a breach of the PER or is it?

The Oracle said...

As I said in an earlier post - no justification in raising more than what was actually needed.
This is a case of borrowing from Peter to pay Paul which will have to be done again the next time because the charges get larger every time.
Same as borrowing from one money lender to pay the other. Yes, the debt is paid but because it's a cycle, the borrowing (and need to pay back) becomes larger every time.
Sadly, neither Khaiyum nor Frank B will be around to see the end of the cycle they created. Only our children will.

Fiji Loyal said...

I see though that an Australian newspaper has already got reaction saying the international bond has been well-received. They not so interested in the plight of the Fiji people, just the tecnicalties of such a major business deal.

Little Prince said...

Nobody like Wadan Narsey to tell the Emperor he has no clothes and his willy is all shrivelled. Vinaka vaka levu, Prof Narsey

Anonymous said...

TAKE NOTE boys and girls : this is the Bai and Aiyaz Financial Wizadry at work.
They are showing us their best effort, and even the Ministry and Reserve Bank are happy.

Take note people: they are happy by putting us into more debt.

REMEMBER the GFC happened because greedy people could no longer service their debts.
And that is exactly where these 2 idiots are taking us to.

Ulukau ga na ulukau

Banks Rip Off said...

Hey, Wilson telling Fiji Village it takes a lot of confidence to go out into the international market and there's confidence in Fiji. Guess banks there to make the big profits, eh. pity it'll be at the expense of Fiji for years tocome thanks to thicko Sayed Khaiyum and co but guess not their fault regime juggling the books.

Radiolucas said...

Thanks Wadan - brilliant article.

TheJoker said...

Jake what are on you sucker.

view said...

There is another possibility.

When a democratic government will be elected, it will consider the previous government "illegal" and all transactions done will be "erased" so to speak.

Those who lend money to Fiji will lose. When you deal with people who are not considered "legitime", then you have to assume a certain risk. Isn't it why they charge high interest rates in the first place?

Fiji can default on this bond, since the people of Fiji didn't back it!

Puf-Military said...

Dr Narsey just shredded the IG's false proclamations with this superb analysis.

Jacquie please put down your crayons, pick up and economics textbook (find one u can understand - Form 1 level) apply urself little girl. In 20 years perhaps you can understand Dr Narsey's excellent writeup, you illiterate ape

Anonymous said...

Who exactly is running FIJI? In the last 4 years, all the MAJOR changes taking place in Fiji have been credited to this ASK fella!

Is he the only one in government? The only other one that we had heard speak was NS but he has been put out to pasture!

What are the others in the governing regime saying to all these? Their condoning all these half-cock measures just goes to show how short-sighted and lost in the feeding trough they are!!!

Our children do not deserve the burden they are being shackled with by this sorry-a..e poor excuse of a government.

They can fool some people some of the time but how dare they think they can fool all the people all the time! And Filimoni...tsk...tsk...tsk, I hope you will have the good sense to take on board Prof Narsey's analysis here!

Anonymous said...

I ask FIRCA is it true that existing investors are owed millions by FIRCA in tax refunds and FIRCA are giving all sorts of excuses not to pay?

It is true that these investors are refusing to invest anymore until FIRCA meet their obligations.

It is also true that all overseas potential investors are aware of this through their embassies and are not investing as a result.

That is one major reason why Fiji is not getting investment

Anonymous said...

So Waqabaca joins the list of collaborators - getting to be a long list - is Naboro big enough for them all?

Anonymous said...

While I admire Doc narsey's courage, there are flaws in his analysism

1. The foreign bond is not additional debt but is part of the deficit funding which is sourced offshore. The alternative was to borrow from the local market, meaning fnpf.

2. Fnpf alone would not be able to provide such funding, not even half of it;

3. Does Doc knows what are the conditions of the IMF loan to say its cheaper? Look at greece and other countries and u will know that the hidden conditions add up;

4. High domestic interest rate is good for fnpf, but its not good for you and mean, for business. At least doc should know this;

5. We talk about limited foreign investment but the truth is that foreign investors are willing to lend $1.3 billion to this Govt. This is the fact.

6. I don't profess to support any political party or ideology

Anonymous said...

If we believed Wadan from 2006 - Fiji economy under the military government was to have collapsed in three years. Yet they are still here and thriving.How much money did you make through consultancies through previous governments, Wadan?-Edited. C4.5

Anonymous said...

Clearly FIRCA do not read your blog site as no response to the millions of $ of unpaid tax refunds of existing foreign investors. Why should offshore investors be asked to prop up this government?

Anonymous said...

@ view 6:55.

"illegal - erased".

Spot on.

Option - tactic that will be employed by next democratic Viti gov. No sympathy for those who lend (lose money) to murderous regimes such as this.

Anonymous said...

Agreed with Wadan that the few remaining young educated public servants like Waqabaca, Vocea, Taito and Naiorosui are just towing the line and compromised the reality of the economic situation in Fiji for the sake of keeping their job and pay packets. Whatever they have learned at uni has been trown out of the window. PR for Frank and his illegal regime is at the top of their job performance indicators.

Radiolucas said...

@ Anon 12:45pm

"If we believed Wadan from 2006 - Fiji economy under the military government was to have collapsed in three years. Yet they are still here and thriving."

So, you call the military's form of growth in the public sector "thriving"? By what measure?

They use our taxes to pay their salaries - they write a budget to suit themselves. They have no oversight, no review, no criticism or foresight for the future.

How is this a measure for Fiji's growth?

We are not growing - we are stagnating. The evidence is in the figures that Wadan quotes.

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