REDUCE RED TAPE: IMF
Fiji’s high debt deprives it of the fiscal space to respond to shocks, the International Monetary Fund said yesterday.
Reduced policy uncertainty could help jumpstart private investment, the International Monetary Fund said.
And growth-enhancing measures, such as cutting red tape should be seasonally renewed, said IMF’s mission chief to Fiji, Marshall Mills. He led a delegation that also recommended improving infrastructure to attract private and foreign investment. “Increasing investment in climate adaptation and renewable energy can help reinforce Fiji’s ability to absorb related shocks,” Mr Mills said.
“Monetary policy should start now to gradually unwind the accommodative stance, which is an appropriate response to the pandemic.” Moving to a more neutral stance by addressing the historically high levels of liquidity and low interest rates would put the Reserve Bank of Fiji in a position to manage pressures on inflation or reserves as they emerge, Mr Mills said.
The IMF recommended the development of an appropriate crisis prevention and management framework.
As the economic situation improved, there was room for the reversal of the additional exchange restrictions on current transactions and capital flow measures, that were implemented in April 2020, Mr Mills said.
Long-standing exchange restrictions which added to business costs, and served as a deterrent, needed to be phased out, he said.
“Fiji’s growth outlook beyond the current rebound will rest critically on the ability to implement a welldesigned long-term reform and growth strategy,” Mr Mills said.
‘DEBT REMAINS STUBBORNLY HIGH’
Continuing momentum in tourist inflows could sustain above-trend economic growth in the near-term, the IMF mission to Fiji reported. It recommended:
Policies designed to focus on maintaining medium-term growth.
Rebuilding buffers, Enhancing resilience. Front-load fiscal consolidation with a comprehensive tax reform strategy in the next national Budget, and A simplified tax system.
Fiji’s high debt deprives it of the fiscal space to respond to shocks, the International Monetary Fund said yesterday.
The country remains vulnerable to weaker growth in advanced economies that would reduce tourist flows and remittances, the IMF mission reported.
The key priority is to reinforce the balance sheet of the government to provide fiscal space to manage future shocks, Mr Mills said.
“The government should launch a medium-term fiscal consolidation, relying on revenue mobilization while promoting growth, private investment, and social inclusion,” Mr Mills said.
Fiji’s financing situation is healthy, said as the delegation rounded up its annual in-country check-up.
And while economic recovery was strong, central Government debt remained ‘stubbornly high’ at 85 per cent of GDP.
“With high global commodity prices and the still partial recovery in tourism, the current account deficit remained elevated at an estimated 14 per cent of GDP in 2022,” Mr Mills said.
Inflation has eased to 1.5 per cent last month, while foreign exchange reserves remained relatively comfortable at 6.2 months of prospective imports, cushioned by concessional financing from donors and remittances, he said.
The rebound of real gross domestic product (GDP) growth at 16 per cent in 2022. Fiscal deficits are falling from 12.2 per cent of GDP in 2022, to a projected 7.7 per cent for 2023.