Government Pay Increase Sparks Inflation Concerns

Westpac has raised concerns that the hike in government employees’ pay may contribute to already high prices, even though it will support disposable income.

In its Westpac Wave Fiji Quarterly Economic Update released today, the bank noted that the 2024-2025 Budget aims to address cost of living pressures through pay increments, ensure economic stability, and consolidate the government’s medium-term fiscal position.

Key highlights from the budget include an increase in the national minimum wage from $4 to $5 per hour in two phases and raising sectoral minimum wages. Government employees will receive pay increases ranging from 7-10 percent for salaried workers and 10-20 percent for wage earners, with $85 million allocated for these increases, according to the update.

While this wage relief will bolster disposable income, there are concerns that it may further contribute to high prices.

The update also revealed that the Coalition Government expects $3.9 billion in revenue and plans to spend an estimated $4.6 billion, resulting in a fiscal deficit of $635.5 million (4.5 percent of GDP) for the next fiscal year. The gross deficit is projected at $984.6 million (7.0 percent of GDP), which includes $349.1 million in principal debt repayments.

To finance the deficit, the Fiji Government will borrow $298.3 million from external sources and $686.3 million in domestic bonds and loans.

Gross debt is expected to decrease slightly to 77.8 percent of GDP by July 2025, mainly due to an increase in nominal GDP.

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