Tuvalu News

Future Doesn't Look Promising and 2003 Will be a Challenging Year
Pacific Magazine, January 2003

TBy Samisoni Pareti

Any illusion that the honeymoon for the new government of Tuvalu will continue for sometime went out the window last month with the handing down of Prime Minister Saufatu Sopoanga’s 2003 budget.

Falling fishing licence fees and unfavourable returns from its trust fund meant times are not going to be easy for Tuvalu. It appears too that ripples from the bubble burst in the IT industry worldwide has finally lapped onto the shores of this tiny atoll.

The future, according to Sopoanga, doesn’t look as promising as it used to be.

“2003 is indeed a year of anxiety,” is how he likes to put it. “This is because the long-term potential benefit from our high level domain name, the so-called dot TV, is diminishing,” Sopoanga told Islands Business.

“Secondly, the windfall revenue from fishing and telecommunications licences have dropped significantly, and the performance of the Tuvalu Trust Fund has been unfavourable in the last couple of years due to the downfall in the world financial market. As a result, the distribution is not forthcoming for the 2001/2002 fiscal year.”

The trust fund was set up years ago by one-time Prime Minister of Tuvalu, who later became Secretary General of the Suva-based Pacific Islands Forum Secretariat, Henry Naisali. Interest from the fund donated by colonial powers like Britain kept the island nation in good stead over the years. But not anymore, Sopoanga believes.

“2003 will be a year of great challenge that requires prudent financial management on the part of all stakeholders in Tuvalu,” the country’s prime minister said.

The A$31 million budget sets revenue at A$25 million and capital expenditure at A$4 million, giving a net deficit of A$7 million.

“My government has no foreign debt, but it does have a small amount of domestic debt with provisions made in this budget to clear them.”

It’s believed the Sopoanga administration intends to draw A$1.75 million from its trust fund to meet the budget shortfall.

Largest source of revenue for Tuvalu in 2003 will be the A$5 million from fishing licence fees. Sopoanga estimates foreign aid at about A$2.06 million, mainly from Taiwan and the European Union.

A bold move for the five-month old Sopoanga administration has been the drastic reduction in its development or capital budget. From a vote of A$11 million in 2002, special development expenditure (SDE) for 2003 is just about A$4 million, a reduction of about 60 percent.

“Although this substantial reduction will have some adverse development implications, the fact that the long-term sustainability is paramount makes it appropriate to spend our limited resources on priority developments only.

“Most of the expenditure for both core and SDE will be financed by the underlying revenue from taxes, government charges and interest and dividends.”

As if to show he meant business when it wants prudent financial management, Sopoanga says funds for SDE will now be kept in a separate pool and each government department will have to bid for the money.

“The pool fund is placed under the Ministry of Finance, Economic Planning and Industries.

“All line ministries will have to bid for this fund. A special committee will then vet each ministry’s bid according to approved procedures and make recommendations to cabinet for final approval.

“This way all bidders will have to submit their SDE requirements according to the criteria.”


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