‘Do not fear the debt mountain’

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“I THINK the people of Fiji, including the government should not fear the “debt mountain”, saidANZ International economist Dr Kishti Sen.

“The size of the debt Fiji has not really led to an increase in cost of debt,” Dr Sen elaborated in an interview with this newspaper alongside ANZ country head for Fiji, Rabih Yazbek.

“If you look at the interest repayments on Fiji’s total debt its about $400 million a year, which is only about 13.3 per cent of revenue. In the past we’ve had interest payments close to 21 per cent of revenue, and still, we were able to meet our payment obligations.

“So, I think this obsession with debt is a bit overblown and I think we need some rational and sensible debate in terms of how we reduce budget deficits and reduce debt to GDP over time,” Dr Sen added.

Mr Yazbek concurred saying, “I think the conversation needs to become more nuanced.”

“Looking at debt to GDP ratio alone is quite a simplistic view. I know that’s what is most simply referred to is debt to GDP ratio, but there’s a lot of different factors that influence how appropriate the debt level is.

“We need to talk about the portion of that debt that is external versus internal. Because most of that debt is actually domestic debt,” Mr Yazbek highlighted.

Mr Yazbek also made the point that much of the debt taken on by the new government from the previous was

“necessary during COVID and was done at almost 0 per cent interest.”

Additionally, Dr Sen highlighted that potential lenders are still willing to help Fiji finance its deficit and that credit rating agencies have recently upgraded Fiji’s credit outlook from negative to stable.

To this point, 2022 was a year of exceptional growth for Fiji and the statistics of that growth have not yet been made available, suggesting the level of debt is, according to Dr Sen, likely lower than 80 per cent.