The government is once again postponing critical budget repairs, opting to leave these challenges for future budgets instead of addressing them now. This perspective aligns with recent comments made by Unity Fiji Party leader and former Reserve Bank of Fiji governor, Savenaca Narube.
ANZ Bank international economists Dr. Kishti Sen and Tom Kenny have suggested that maintaining a more conservative budget deficit—keeping it below four percent of Gross Domestic Product (GDP)—could help reduce Fiji’s debt-to-GDP ratio faster than anticipated in the 2024-2025 National Budget, which was recently presented by Deputy Prime Minister and Minister of Finance, Professor Biman Prasad.
In their latest Pacific Insight, titled “Fiji’s ‘safe’ mid-term budget won’t upset the apple cart,” the economists pointed to the government’s operating expenditure as a critical area for improvement. They stated that the overall deficit is projected to improve to -$544 million by 2026-2027, or -3.5 percent of GDP. However, they argue that greater fiscal prudence in managing operating expenditure as a proportion of GDP could lead to a quicker improvement in the budget balance.
“A quicker reduction in deficits would contain interest payments and put the debt-to-GDP ratio on a downward path to 60 percent sooner than the 2040 time frame currently predicted by official estimates. Budget conservatism may also improve the country’s credit outlook over the medium term from its current B rating,” the economists noted.
The economists acknowledged that the government faces competing priorities and cannot resolve all economic problems simultaneously. However, they suggested that collaboration with the private sector could drive job creation, GDP growth, and increased government revenue.
The 2024-2025 budget aligns with this view, showing few surprises and staying on course. Nevertheless, some aspects of budget repair, which were part of the government’s 2022 fiscal responsibility campaign promises, seem to have been deferred to future budgets.
Wages and salaries, the largest component of the government’s operating expenditure, amounted to over $1 billion in the 2023-2024 budget and are expected to grow by 15.1 percent in the 2024-2025 budget. This increase is driven by recent wage raises for civil servants, ranging from 7 to 20 percent, as noted by the economists.