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Decentralization

Financial Services Bureau (FSB) are being set up in 5 different provinces

The 2014 National budget to be tabled in Parliament 2013 caters for an increase in the Ministry of Education’s budget with Vt201 million for scholarships and support primary schools, Vt65million for medicines and retirement packages for health workers, Vt20million for police recruitment. Minister of Public Finance and Economic Management (PFEM), Maki Simelum, revealed the above when he presented the budget speech as the introductory prerequisite to tabling the Bill of Appropriation (2014) in Parliament session 2013.

The productive sector will see an increase of Vt23million into the extension services in the Ministry of Agriculture, Livestock, Fisheries and Biosecurity whilst Vt88million is for severance payment of long time senior government employees which also paves way for the young University graduates. “This budget reflects that the government is committed to rectifying the budget deficits in the past three years and adheres to section 22 of the PFEM Act, ensuring that expenditure does not exceed revenue generated and there must be a surplus,” said the Finance Minister. “Revenue-wise the government hopes to receive Vt15.2billion in its coffers in 2014, a 4.3% increase from 2013’s figure. “The 2014 budget does not include direct budget support. VAT plays a prominent role and it is hoped tax will generate Vt5.7billion.

“The government also wants to implement viable revenue initiatives for the midterm and long term.”

In terms of expenditure he said the government estimated an expenditure of Vt14.7billion in 2014, this excludes money spend on projects and programs from donors.

This amount exceeds the amount in 2013 which was Vt14.1billion due to increase government commitments and proposals. In each ministry the budget ceiling is almost the same as 2013s with increases only in some identified areas.

The total amount of expenditure in 2014, including from donors is Vt17.17billion.

“I wish to clarify that government funds spend on salary is increasing, using funds which should be injected into service delivery,” the Finance minister said.

“There is need for financial check before the Public Services Commission approves any new employee and also a stringent management of allowance.

“Government employees must realise revenue is public money and remember this when they claim allowance and manage it properly.

“Because our expenditure is always on the rise I as minister will ensure there are mechanisms in place to ensure ministries spend within their budget, do not pay new vehicles and employ new employees on areas which can generate revenue.”

Minister Simelum said in 2013 the government had a supplementary budget because of unbudgeted expenditure but it managed to control and manage funds in the first nine months.

“The 2013 budget anticipated a surplus of Vt493.5million because the government had budget deficits for the past three consecutive years,” he told Parliament.

“I am pleased to inform for the first nine months government has a surplus of Vt66.9million, excluding funding from donor partners. At the end of the nine months in 2013 the Vanuatu government had Vt10.8billion, which is 10% more than what it acquired at the same time in 2012 and is the equivalent of 74% of the budget target.

“This is due to Customs VAT and Hong Kong PR program, all revenue from projects coming into the government coffers reached Vt12.2billion by the end of September.

“At the end of September 2013 the government spent Vt10.7billion out of the Vt14.1billion of its budget, which is 76% of the budget target and 1% more of the expenditure at the same time in 2012.

“When including donor funds, the total government expenditure in the same period is Vt12.5billion.”

Areas which exceed their budgets are: At the end of September, the salary of people on contract which is Vt29.6milllion when its budget was Vt6.5million.

Overtime was Vt71.5million when its budget was only Vt43.3million, Vt49.2million was spend on transport of cargo when the budget was Vt14.4million, the price of fixing and maintaining vehicles was Vt116.7million when its budget was Vt79.3million and the cost of food and accommodation of people travelling to the islands and abroad was Vt197.3million when the budget was Vt176.2million.

On debts, in particular telephone bills and electricity, the minister said, “For the last two months this government took strong action to ensure the ministries, departments and constitutional bodies pay up outstanding bills incurred in 2013,”he said.

“I acknowledge the Chief Government Information Officer and Finance for fixing debts with TVL and Digicel and restrict future debts.

“The government needed extra money and passed a supplementary in August 2013 which are: Vt298milllion for scholarships, Vt22million for MSG contribution and Vt20million to Tourism.

“The government loaned for Vt400million from a domestic market (bond) in August for this supplementary and it also used section 34 (c) of the Public Finance and Economic Management (PFEM) Act [CAP 244] to allow it to use Vt53million to create two new ministries, which are the Ministry of Youth Development and Sports and the Ministry of Climate Change, Geohazard, Meteorology and Energy.

“On loans at the end of 2013 Government loans will reach 20% of the country’s GDP, the International Monetary Fund says we should not exceed 40%.

“It is true that we acquired a Vt400million domestic bond in August to fund the supplementary budget but the government is in a good position in revenue and so does not need to get a new loan to meet operation costs.

“In addition it paid a Vt100million domestic bond in April, 2013.

“Externally no new loans as yet because the projects have not started and we must repay Vt493million in overseas loans.”

The Finance minister said the country’s inflation is at a low rate.

“In the last six months, that is June the prices only went up by 1.5%, a good level because it did not reach the 4% target stipulated by the Reserve Bank of Vanuatu (RBV).

“But there are risks, because when the construction sector grows it also has the potential to lift the price of fuel and materials in shops. We have to manage these risks to maintain a low level inflation.

“Another risk is when there is pressure in price, the economy will grow but it means the current account deficit will grow from bad to worse because our people will want to buy more things and many of these are imported, always Vanuatu imports more than it exports.

“Reserves are alright and we have enough for 6/7 months which exceeds the minimum by RBV which is four months.”

In presenting the budget for the Vanuatu government in 2014, minister Simelum said despite encountering difficulty in the last five years Vanuatu’s economy, with some of its Pacific neighbors has witnessed a growth in its economy.

He said the budget to be presented reaffirms the Government’s commitment for an educated, healthy and wealthy Vanuatu.

 

Quick Facts
  • GDP(PPP)
  • $703,051 million (Nominal)
  • 2.3% growth 2014
  • 1.8 % 5-year average annual growth
  • Inflation (CPI):
  • 1.4%
  • FDI Inflow
  • $34.7 million

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Ministry of Finance and Economic Management (MFEM)
Department of Finance and Treasury (DoFT)
PMB 9031
Port Vila
Vanuatu, South West Pacific
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