Tuvalu News


Island Business
February 5, 2006

Samisoni Pareti

Maatia Toafa will have to figure out a way to cushion the biting effects of rising oil prices as the prime minister leads Tuvalu into the polls in a few months' time.

A date was to be determined by Toafa's cabinet late last month, according to Nelesone Panapasi, Tuvalu's secretary to government. Although the current government's term does not expire until August, many islanders are bracing themselves for an election as early as March or April.

Toafa was bubbly about his chances for a comeback, especially since changes in the 15-seat legislature over the last few months had given him a two-thirds majority.

Asked by this magazine whether he's gunning for a new mandate from voters as PM, Toafa responded: “Why not?”

If he does succeed and returned to power, the former Pacific Islands Forum Secretariat trade officer will be one of the very few Tuvaluan leaders that have enjoyed some sense of permanency in the job. Most of his predecessors would be lucky to remain in the job 12 or 18 months after taking office, due mainly to confidence motions in parliament. The likelihood of this occurring lingers especially since Toafa has in his cabinet two former PMs-Saufatu Sopoanga and Bikenibeu Paeniu. It is no secret that both men lavish the chance to retake the number one seat.

Last December, Toafa was more concerned about the adoption of his 2006 budget which featured a A$3 million deficit.

A more prudent fiscal management would be the way to go, Toafa told ISLANDS BUSINESS in light of declining revenue.

“Fishing licence fees have been dropping the last few years,” the PM says.

“It seems more and more boats are leaving our waters to move westward to countries like Papua New Guinea.”

Tuvalu currently gets US$9000 a fishing boat in access fees, something Toafa would really want to change.

“That's really nothing when you consider the huge benefit boats get in return.

“It may be better if islands countries get together and agree on a standard minimum fee that we can all apply.”

Revenue volatility was an issue highlighted by the Asian Development Bank in a recent review of the island's macroeconomic policies.

“Budget management has to deal with the difficulties created by one of the largest revenue items, fishing licences, coming in over the last month of the financial year,” the bank noted.

“Not only are these revenues received late, but it is difficult to predict changes from year to year.

“The likely income is only known with confidence well into the second half of the financial year.”

ADB also drew attention to Tuvalu's bulging wage bill which it said had increased by 17% in real terms since 2001 and by 146% since 1996.

By late 2004, the bank said 1100 public servants-10% of the island's population-were on the payroll.

“If the recent growth in wages continues, personnel costs will inevitably put pressure on the overall budget outcome and displace other expenditures with an adverse impact on the quality of government services.”

The Ministry of Finance asked for written questions when contacted in January, but a response was not received by press time. Toafa, however, did not address this during the telephone interview he gave this magazine. But spoke of plans to finance a new powerhouse for the capital, Funafuti.

Generators in the outer islands will have to be upgraded too as well as the renovations of several islands schools.

The premier acknowledged that heightened fuel prices hovering at around US$66 a barrel last month was causing a haemorrhage on public finances. The government-owned powerhouse was charging 47 cents a unit of electricity, whilst it cost the company A$1.29 to produce that same unit with government subsiding the cost of electricity generation in Funafuti.

Toafa said his government would be interested in finding ways to cushion the fuel price hike.

He did not mention renewable energy as an option.

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