The small open economy of Fiji, which heavily relies on imports and tourism, is highly susceptible to changes in the global economy and effects of climate change due to its remote location. The country’s Deputy Prime Minister and Minister for Finance, Professor Biman Prasad, disclosed that the government experienced nearly a 50% decline in revenues amid the COVID-19 pandemic, attributable to severe economic contractions of 17% in 2020 and 4.9% in 2021.
Professor Prasad stated that the government resorted to heavy borrowing to maintain its operations and provide assistance to the Fijian populace affected by the pandemic. Consequently, the government has reported net deficits exceeding $1 billion during the pandemic years.
In response to this situation, the Coalition Government initiated a medium-term fiscal consolidation strategy for FY2023-2024, with the objectives of reducing fiscal deficits, restoring fiscal buffers, decreasing the debt-to-GDP ratio, and improving long-term debt sustainability.
Professor Prasad emphasized the importance of fiscal risk analysis in determining Fiji’s capacity to absorb future potential shocks, considering the significant fiscal deficits and escalating public debt experienced during the pandemic years. In related news, the Parliament is set to deliberate on the 2024-2025 National Budget in the coming week.