The Deputy Prime Minister and Minister for Finance, Professor Biman Prasad, has emphasized the Government’s long-term commitment to a fiscal plan spanning the next decade or two, rather than pursuing short-term solutions.
Professor Prasad stated that achieving this plan would be a significant accomplishment for the country, setting a foundation for reducing the debt-to-GDP ratio. He acknowledged that this initiative is not something the Government can resolve within one or two years but requires sustained commitment for the benefit of future administrations.
“The political will and national commitment to manage our debt have been praised by international agencies, financial institutions, credit rating agencies, and all our development partners,” he noted.
According to the Deputy Prime Minister, this strategic approach has instilled confidence among investors, both domestic and foreign, looking at Fiji as a stable and promising market.
Regarding fiscal policies, Professor Prasad highlighted the potential financial implications of lowering the Value Added Tax (VAT) from 15 percent to 9 percent, as proposed by the Opposition. He explained that such a reduction would result in a significant revenue loss of $600 million. For each one percent reduction in VAT, the country would lose approximately $100 million in tax revenues.
“Are you prepared to increase the fiscal deficit to double digits and add $600 million in loans?” he questioned, noting the practical challenges in securing the additional financing.
Professor Prasad clarified that the current 15 percent VAT rate is not arbitrary but is based on thorough analysis and available data. He stressed that adequate funding is essential to ensure the proper functioning of government operations.