The government is once again delaying much-needed budget repairs, deferring the task to future budgets rather than addressing the issues now.
ANZ Bank’s international economists, Dr. Kishti Sen and Tom Kenny, have echoed recent remarks by Unity Fiji Party leader and former Reserve Bank of Fiji governor Savenaca Narube. They suggest that maintaining a more conservative budget deficit—under four percent of Gross Domestic Product (GDP)—would more rapidly reduce Fiji’s debt-to-GDP ratio than projected in the 2024-2025 National Budget, which was presented last week by Deputy Prime Minister and Minister of Finance Professor Biman Prasad.
In their latest Pacific Insight report, titled “Fiji’s ‘safe’ mid-term budget won’t upset the apple cart,” the economists highlighted government operating expenditure as a crucial focus area.
“The overall deficit is expected to improve to -$544 million by 2026-2027, or -3.5 percent of GDP. However, exercising fiscal prudence regarding operating expenditure relative to GDP could hasten the improvement of the budget balance,” the report stated.
“A swifter reduction in deficits would contain interest payments and place the debt-to-GDP ratio on a downward trajectory, reaching 60 percent sooner than the 2040 timeframe in official estimates. Budget conservatism may also enhance the country’s credit outlook over the medium term from its current B rating.”
The economists noted that while the government faces multiple competing priorities and cannot solve all economic issues at once, collaboration with the private sector could stimulate job creation, GDP growth, and government revenue.
“With few surprises in the 2024-2025 budget, this is on track. However, some aspects of budget repair, promised in the government’s 2022 election campaign, appear to have been postponed to future budgets,” they commented.
Wages and salaries, the largest component of the government’s operating expenditure, amounted to slightly over $1 billion in the 2023-2024 budget and are projected to grow by 15.1 percent in the 2024-2025 budget. This increase is driven by a catch-up in wage rises for civil servants, ranging from 7 to 20 percent, the economists noted.