Fiji’s Fiscal Future: Navigating Between Spending and Stability

Economist Kishti Sen from ANZ has emphasized the need for the Fijian government to adopt a robust spending strategy now, projecting a total borrowing of $1.4 billion to finance its operations, capital expenditures, and debt servicing for the 2025-2026 financial year. This follows the expansionary budget handed down by Deputy Prime Minister Biman Prasad, which has raised concerns as it aims to push Fiji’s debt to unprecedented levels, diverging from the previous Coalition Government’s focus on fiscal consolidation.

Sen pointed out that Fiji does not face a revenue issue but an expense problem. This implies that the government will need to address its budget practices and realign spending back to manageable levels, ideally around 25% of GDP where historical data shows the country experienced smaller deficits or even surpluses. He stated, “What Fiji needs to do is bring that (expenses) closer to 25 percent,” emphasizing the importance of managing government expenditures to stimulate more fiscal health and stability.

While the budget presents a significant deficit of $886.1 million—equating to 6.0% of GDP—Sen noted that now is not the appropriate time for budget reforms, given the slowing economy. Instead, continued government investment is crucial to maintain economic momentum until private sector spending can gain traction. He warned against reducing public expenditure, as this could exacerbate economic slowdowns and threaten job security.

The economist foresees that budget repair, although essential, should be deferred until the economy stabilizes. He highlighted that public sector expenditure currently represents 25% of GDP, making it a vital component for many businesses and employment. Sen also urged caution, advocating that future restraints on recurrent expenditures should not compromise essential service delivery.

This perspective aligns with previous discussions on Fiji’s fiscal strategy, highlighting the need for a balance between immediate spending to stimulate growth and longer-term budget sustainability aimed at debt reduction, providing hope for a resilient economic future.