AHA, NOW THE IGS REALLY WORRIED

Reserve Bank of Fiji Governor Sada Reddy has warned of the need to keep government’s contingent liabilities under control, saying there are signs that a few institutions with government-guaranteed debts may not be able to meet their obligations.

Addressing the Fiji Institute of Accountants annual congress, Reddy said the government’s total contingent liabilities in 2009 were around $1.7 billion, equivalent to about 26.5 percent of GDP.

“This level of contingent liabilities is extremely high given the weak revenue base of the government,” he said.

Reddy said the liabilities had grown substantially over the past several years and the trend must be stopped.

“What it does is that without the government really knowing what is really going on in the institutions whose debts government has guaranteed, suddenly government is faced with  those contingent liabilities coming on to the government’s books and thus, seriously compromising government’s finances.”

Reddy pointed to the collapse of the National Bank of Fiji in the mid-1990s, and in more recent times, government having to convert nearly $40 million of Housing Authority debt to equity because the authority was in no position to meet its obligations.

“This situation must not be allowed to continue,” he said.

“Government must carry out proper diligence on statutory corporations which seek government guarantees. If such organizations are not properly managed and run, government must put conditions to any guarantees it gives in future so that proper reforms are done to make these institutions financially viable so that they borrow on their own strength in the market.”

“There is a huge moral hazard problem here. The boards and management of these statutory bodies take it for granted that the government is there to bail them out if they get into difficulties. So they fail to take timely corrective actions to reform the institutions they are in charge of.”

Reddy also acknowledged the concerns raised, “rightly so”, about whether government has the capability to repay the US$150 million bond that was issued by government in September 2006.

“The government and RBF are actively exploring all possibilities to meet this repayment and Fiji as usual will meet all its foreign obligations whatever it takes.”

4 Responses to “AHA, NOW THE IGS REALLY WORRIED”

  1. Nostradamus Says:

    Whatever it takes?
    Another devaluation?
    Double digit inflation?
    We will balance those books no matter how devastating it is for the People.
    The one thing we won’t do is cut back on military expenditure, because this is what keeps us in power. Turning mercenary Fijian soldiers against ordinary Fijians to keep us (half-castes and Indians) in power.
    Whatever it takes.

  2. abeche Says:

    Sada Reddy was the Chairman of the HA when the 40M was converted into equity. Was it before or after th coup? He talks about directors obligations…. . One wonders how th HA will now pay the CHinese loan to build houses in FIji. Sada Reddy could not fix HA, how can we expect him to fix the economy – who is he goingto turn to to meet the US $150M now maturing?

    Other statutory orgs with govt guaranteed debts, include, FBCL, FDB, FEA, HA – all borrowed from the FNPF.

  3. rokobatidua Says:

    Whenever the loan repayments is due you either payup one way or another!! Just remember our history in dealing with Americano! If you take the money than make sure you repay the same when payment is due or a serious looking uncle SAM will be birth throughout the Suva bay with BIG GUNS pointed directly at Delai na bua and the blockhead PM.

  4. Annon. Says:

    @ rokobatidua.

    Very true – remember Ritova?

    Bati – keep sharp eye on horizon next few weeks?

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