FIJI: European Union considering suspending aid
Updated
The European Union is considering suspending millions of dollars in aid to Fiji. The EU says there was no justification for the military to re-introduce emergency regulations but Fiji may have already found an alternative source of funds through a 500 million U-S dollar loan from the U-S based Asia bank.
Presenter: Bill Bainbridge
Speakers: Satish Chand, ANU's Crawford School of Economics and Government
BAINBRIDGE: At a meeting in Brussels on Friday the European Union considered whether to cut any its $245 million support to Fiji after the military government reimposed Public Emergency Regulations.
A spokeswoman for the EU in the Pacific says she is not aware of the outcome of the meeting and the matter is likely to be further considered at an EU Ministerial meeting later this month. A statement last week said in the EU's assessment, it was not apparent which threats to national security, public order and safety existed to justify such a drastic measure as bringing back the Public Emergency Regulations.
But just as Fiji stands to lose one source of revenue. It stands to gain another through a $500 million loan brokered by Merrill Lynch for the US based Asia Bank. Early last week, Fiji's interim Finance Minister Mahendra Chaudhry said received an offer for bilateral loan financing from the investment bank. But he din not disclose the interest rate or any other terms of the loan.
Satish Chand is the director Pacific Policy Project Crawford School of Economics and Government, at the Australian National University. He says it's surprising that an investment bank would agree to loan an amount equivalent to 20 per cent of Fiji's GDP.
CHAND: I can see where the government of Fiji is coming from. They need the money for various reasons, including the fact that their foreign reserves are running low. The government would also need to finance its budget deficit. So from the Fijian point of view, that makes a lot of sense. I'm not so sure exactly what Merrill Lynch has done in coming to the view that they could extend that some of money.
LEWIS: And he says the loan is a high risk one.
CHAND: Merrill Lynch I am assuming would have done their homework and this is why we need to know the interest rate, because the interest rate would be a reflection on their perception of risk for Fiji, at least on the sort of numbers we have now, it would be a loan which would have a fair amount of risk to it. Definitely a lot more risk here, than what it would be say in Australia or elsewhere.
LEWIS: Satish Chand says the loan would add to the country's debt burden - especially if was not well invested.
CHAND: Look, so far, Fiji has had fairly low levels of debt and particularly foreign debt. The 500 million would add substantially to Fiji's foreign debt. I don't have the figures right on top of my head now, but my guess is that total debt to GDP in Fiji had exceeded 50 per cent.
LEWIS: He says the loan could undermine the EU's efforts to put diplomatic pressure on Fiji but that would not be a major concern to Merrill Lynch or to Asia Bank.
CHAND: Well, I guess Merrill Lynch is probably just like any other firm that's trying to maximise its profits and I suspect they are not there on sort of on moral grounds. I think they are there to make money and if they have done their sums, and if they're sure that they would make money out of it, good on them. My guess is that this won't be an easy one to pull off. I mean I would believe the money once it reaches Fiji. At the moment, I think it's just discussion.
