FIJI wrapped up its 2024-2025 fiscal year with a surprisingly positive outcome as the fiscal deficit shrank to 2.4 percent of GDP, significantly better than the initial projection of 4.5 percent and last year’s 3.4 percent. This achievement is being celebrated as a testament to effective fiscal management and improved revenue generation.
Despite this encouraging result, Shamal Chand, senior economist at Westpac Fiji, cautioned about the upcoming financial year, expressing concerns over potential increases in both deficit and debt levels. He emphasized the necessity for continued realistic budgeting, efficient capital expenditure, and revenue diversification to safeguard ongoing fiscal stability and enhance long-term economic resilience.
In Westpac Fiji’s economic update released last month, it was noted that the government had reached a record total revenue of $4.05 billion, surpassing both the original and revised forecasts—a substantial increase driven by exceptional tax collections that soared by 12.2 percent year-on-year to $3.48 billion, alongside a 2.8 percent rise in non-tax revenue to $565 million. Key contributors to this robust performance included significant gains in corporate tax, VAT, and personal income tax, with VAT collections alone up by $173.4 million compared to the previous fiscal year.
The government managed to maintain total spending at $4.39 billion, which was 1.2 percent lower than the revised estimate. This careful spending was characterized by operating expenditures of $3.25 billion and capital expenditures of $1.06 billion, suggesting a historical trend of underestimating expenditures that has resulted in lower realized deficits.
Crucially, the prudent fiscal management led to a reduction in the debt-to-GDP ratio, which now stands at 77.1 percent, down from 79.0 percent the prior year. This proportion reflects a mix of domestic and external debts, with domestic debt comprising 64.8 percent of total debt and external debt at 35.2 percent.
However, the outlook for the financial year 2025–2026 is concerning, as the budget anticipates a nominal deficit of $886 million, which would equate to 6.0 percent of GDP—the third largest in Fiji’s fiscal history. Despite facing these challenges, the government has maintained a strong cash position, with approximately $900 million in bank deposits as of August, providing it with some flexibility in managing debt issuance, especially in light of undersubscribed long-term bonds driven by investor demand for higher yields.
Amid the mixed outlook, the emphasis on fiscal discipline and strategic investments presents a hopeful prospect for Fiji’s economic future. As the government navigates these fiscal demands, the focus on fostering growth through careful planning and investment can pave the way for a stabilized and prosperous economy.
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