In his pre-budget video message, Biman Prasad, Minister of Finance and Deputy Prime Minister, stressed the importance of generating income to satisfy debts, stating, “If you borrow, you have to pay. And you cannot continue to borrow and not generate any income to be able to service the debt.”
Prasad pointed out that the central challenge in preparing the 2024-2025 National Budget is to maintain control over the national debt. The government must find a balance between tax revenue and the necessary expenses to keep its operations moving forward.
Historically, our revenue has not been sufficient to cover our costs, and we have had to resort to borrowing to fund our budget deficits, Prasad said. There’s not much left over for infrastructure and public service improvements, such as building new roads and repairing hospitals.
The government’s total debt was approximately $9.7 billion at the end of the fiscal year in July 2023, representing 80% of the Gross Domestic Product (GDP), according to the 2022-2023 Annual Debt Report released last October by the Ministry of Finance.
This debt needs to be reduced, the Finance Minister urged. The focus should be on lowering the debt percentage to GDP by expanding the economy, rather than merely lowering the amount of debt.
Prasad emphasized that the crucial measure of a country’s economic health in terms of debt position is its debt-to-GDP ratio. He explained that a lower ratio is preferable and that through the government’s deliberate policies, the country has managed to reduce its ratio to just below 80%.
However, tackling government waste is another key focus, alongside controlling government debt, said Prasad. He highlighted the importance of growing the economy at an average of 4.5-5% to bring the debt-to-GDP ratio down to about 50-60%, a level at which many small countries, like Fiji, feel more comfortable.