Financial Secretary Office News

Financial Secretary Office News

PRESS RELEASE: Cook Islands Graduation from Official Development Assistance

Following strong economic growth in 2014, 2015 and 2016, the Cook Islands Government was notified by the Organisation for Economic Cooperation and Development (OECD) that it was on the list of countries that was likely to reach high income status by 2017. This list is utilized by the OECD’s Development Assistance Committee (DAC) to determine eligibility for Official Development Assistance (ODA). 
In June 2017 a Cook Islands’ Government official, together with New Zealand Ministry of Foreign Affairs and Trade (MFAT) Officials, visited Paris to present an argument to the OECD for additional time to address gaps in the current economic data on the Cook Islands. Key to this argument was that graduation should be based on Gross National Income (GNI) data. The Cook Islands does not currently produce this data, as a result Gross Domestic Product (GDP) was being used to determine eligibility. 
The problem with this approach is that primary income, or rents that flow in and out of the economy, are not included in GDP statistics. In this case, like in many small island economies, the Cook Islands measurement of GNI is likely to be much lower than GDP. It is possible that GNI will be below the ‘high income’ threshold required for graduation.  
If the Cook Islands graduates prematurely due to inadequate data, this could have serious long-term negative consequences for economic development. Key issues to consider in the case of premature graduation are; the high cost of running government due to the geography of the Cook Islands, with many islands scattered over a large distance, vulnerability to natural disasters and economic downturns in Australia and New Zealand, and the cessation of community development programs most of which is funded by ODA.
In July 2017, the OECD agreed to provide the Cook Islands until the end of 2018 to develop GNI data. Since this time, the National Statistics Office of the Ministry of Finance and Economic Management (MFEM) has been working closely with MFAT and the International Monetary Fund’s Pacific Financial and Technical Assistance Centre (PFTAC) on the development of this data. 
At this stage, revisions are being made to our GDP (economic growth may not have been as strong as we thought). In addition, flows out of the country have been picked up that suggest that GNI will be lower than GDP. Therefore, it is possible that the Cook Islands will not graduate. Much more work needs to be undertaken over the next 15 months to determine the level of the Cook Islands’ economic development and the Cook Islands Government acknowledge with appreciation the support of the Governments of New Zealand and Australia, as well as the IMF for the current work on economic data.
In addition to the work being done on the Cook Islands economic data, the Cook Islands Government is undertaking an analysis on the sectors that would be affected in the event of graduation, to inform a possible transition plan in the event of graduation. It is envisaged that the Public Sector Leaders Conference on 23-24 October 2017 will also serve as a platform to engage with stakeholders on programs/projects that could be affected by graduation in order to provide the Government with a clearer picture of fiscal, social and economic implications. 
End.

Press Release: Preliminary Results for the Year ended 30 June 2017

The Financial Secretary Garth Henderson would like to advise that Cook Islands Government has released preliminary financial results for the year ended 30 June 2017. 

 Operating revenue for Government was up 15% on last financial year and 20% up on the 2016/17 budget estimates at $171.5 million. Improved tax revenue was largely due to the record number of tourist arrivals in 2016/17 and higher than expected fishing revenue.

 In addition to positive operating revenue results, operating expenditure was managed well, coming in 2% below budget at $125.76 million. 

 The net operating balance of the General Government Sector as at 30 June 2017 was a surplus of $45.76 million compared to the 2016/17 budget estimate of $14.2 million.

 Due to the large capital expenditure planned in 2016/17, original fiscal balance estimates were for a deficit of $16.3 million. As a result of delayed capital projects and increases in revenue, the actual fiscal balance in 2016/17, as at 30 June 2017, was a surplus of $32.8 million. Actual Capital Expenditure was 46% lower than estimated at $20.8 million. Recent history illustrates that there is likely a maximum amount of absorptive capacity in capital of around $20 million per year. 

 These positive results were largely reflected in the 2017/18 Budget which revised up 2016/17 estimates. Going forward, the surpluses from 2016/17 will be required to fund capital projects that were delayed in 2016/17, such as Te Mato Vai and Mei Ti Vai Ki Te Vai, in addition to new capital projects such as the Manatua Cable, which are planned for the next four years. To ensure fiscal prudence, and to ensure that the fiscal balance adheres to the fiscal responsibility ratios, new expenditure will be limited during this period. 

 The full reports are available on www.mfem.gov.ck .

 Fiscal Balance of General Government – June 2017

fiscal balance

[END]
26 September 2017

Financial Intelligence Unit *** Scam Warning ***

The Financial Intelligence Unit (FIU) advises the public of a current email scam targeting Cook Islands government officials. 

The FIU wishes to alert any person who has received emails from the following address to ignore the email and to delete it from their inbox:

Email address: henry.puna@mail.com

The FIU reminds people to be vigilant against scams, in particular from email, fake websites and social media. Electronic scams can be highly sophisticated and they may, at first glance, seem legitimate and may purportedly come from a person you know.

The FIU advises the public to be very careful of disclosing personal information or making payments when a request for either is received unsolicited and may involve dealing, or transacting, with people or businesses in countries you normally do not deal with.

For further advice, please contact the FIU on 29182, 55354 or email Intel@cifiu.gov.ck