Former Prime Minister and Fiji Labour Party Leader Mahendra Chaudhry has accused Finance Minister Professor Biman Prasad of self-delusion for blaming the high cost of living solely on imports. Chaudhry argued that the real issue stems from Prasad’s move to increase the Value Added Tax (VAT) to 15 percent a year ago.
According to Chaudhry, “Labour had warned him that raising VAT would spike inflation across the entire economy.” He added that while global inflation does have an impact on domestic markets, suggesting that VAT and corporate tax increases have no effect on inflation is foolish.
Chaudhry criticized Prasad’s dismissive attitude towards the negative impacts of his policies and accused him of attempting to mislead the public. He also argued that Prasad’s efforts to counteract the harsh effects of inflation by raising incomes are insufficient. “The problem with Prasad’s income approach is that inflation is like a disease that requires prevention, not cure,” Chaudhry stated. “To create inflation and then attempt to mitigate against it is like a dog chasing its tail.”
Chaudhry further pointed out that Prasad had promised to reduce VAT and increase the minimum wage during his campaign but did the opposite when in office. He highlighted that Prasad could have followed the example of former Finance Minister Aiyaz Sayed-Khaiyum, who reduced VAT from 15 percent to 9 percent before the 2022 general election.
Chaudhry also criticized Prasad’s continued claims that the economy is performing well, citing an independent assessment by economists at Westpac Bank. The bank issued a cautious warning with a growth outlook of just 2.5 percent, largely based on the tourism sector. This concern aligns with the Reserve Bank’s Macroeconomic Committee, which recently downgraded its forecast for 2024 from 3.8 percent to 2.8 percent.
The downgraded forecast cited reasons such as high inflation, continued high population out-migration, underperforming primary sectors, declining construction activity, and regulatory bottlenecks. Chaudhry concluded by urging Prasad to “take his blinkers off” and acknowledge the reality of the situation.