N.Z. aid ‘rescues’ Cook Islands

Press, Volume CXI, Issue 32801, 29 December 1971, Page 14

N.Z. aid ‘rescues’ Cook Islands

“The Press’* Special Service AUCKLAND, Dec. 28. Extra New Zealand financial aid of more than $1.3 million has rescued the Cook Islands Government from the brink of bankruptcy. Granted recently, the help is in addition to the $2.3 million given annually which makes the self-governing islands territory easily the largest single recipient of regular, official overseas aid from New Zealand. While substantially less

than the $3 million sought, the latest aid is helping to cover an accumulated deficit which had approached $1.4 million. The aid includes $650,000 in “bridging finance” to keep the Avarua administration solvent. It has enabled the settlement, only within recent weeks, of substantial salary and superannuation contribution arrears for public servants. Overspending by the Cook Islands Government began in 1967. It accelerated but was cushioned by the rundown of some $500,000 in reserves, now exhausted. Switching the locally applied financial year to the calendar year last year enabled Avarua to spend 12 months grant money from New Zealand in nine months. By March, the Cook Islands Government had incurred short-term indebtedness and loan liabilities approaching $1 million. It faced a liquidity crisis. Crisis measures are, in turn, being taken to check expenditures and to expand local revenues. But until it

can restore reserves and working capital, the Cook Islands Government contemplates some continuation of hand-to-mouth, day-to-day financial expedients. The Premier (Mr A. R. Henry) concedes that he will probably have to return to New Zealand seeking yet more special aid within a few months. The Ne Zealand Government does not recognise the calendar financial year now observed in the Cook Islands. Its regular aid is granted for a period running from April 1 to March 31, leaving a three-month “gap” which has not been closed. Most of the latest bridging finance, including $426,000 credited to various salary and superannuation increases and arrears, is, in effect, being held in New Zealand to cover debts and obligations run up there. A sum of $lOO,OOO committed to a bank overdraft reduction, represents advance payments of approved housing loans for 1972 and 1973. In addition, $400,000 has been advanced from ordinary aid

properly due in the JanuaryMarch quarter next year. During the first three months of 1972, the Cook Islands Government could thus again find itself short of cash for regular, recurrent expenditure. Longer-term solutions, embracing better , budgetary control, and changes in administrative relationships between Wellington and Avarua are being implemented—but they will take time. In return for the latest aid already granted, Mr Heqry and his Cabinet haVe reluctantly had to waive much of the substance of their selfgoverning status.