The Fijian government is planning to borrow $1.49 billion for the fiscal year 2025-26, with a significant focus on covering interest payments, which are projected to reach $534.5 million. This reflects a growing trend in government financing, as principal debt repayments are also set to increase to $602 million in the same period.
According to Shamal Chand, a senior economist at Westpac Fiji, the government’s borrowing strategy indicates a departure from its earlier fiscal consolidation plans, raising concerns about future public finances. Around 60% of the new borrowing is aimed at fulfilling interest obligations, leaving a smaller portion for capital expenditures.
The borrowing will comprise $559.3 million from external sources and $928.7 million from the domestic market. Overall, this financial plan may lead to an increase in total government debt, which is projected to reach approximately $11.70 billion or 79.8% of GDP by July 2026.
Chand pointed out that though the net deficit is expected to swell to 6% of GDP, the actual deficit could be lower than anticipated due to the government’s historically conservative revenue estimates. He also noted that the shift towards increased external borrowing increases the exchange rate risk for the country’s overall debt portfolio.
In relation to previous articles, the current plan continues a trend noted in earlier budgets, where a large portion of borrowings is utilized to cover existing debts rather than new investments in infrastructure, education, and health—areas emphasized in prior fiscal plans. For instance, the 2024-2025 budget included a notable borrowing of $984.6 million predominantly for similar reasons, impacting overall debt sustainability.
Despite the financial challenges presented by increasing debt levels, there remains a cautious optimism. Effective debt management strategies could mitigate risks associated with high borrowings and potentially refocus funds on investments that promote economic growth and stability.
This highlights the importance of transparency and sustainable fiscal practices to ensure that Fiji can navigate these challenging economic times while still working towards long-term fiscal health.
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