Concessional finance ‘should be priority’

FIJI should prioritise concessional finance for its economic development and climate adaptation and mitigation needs and should ensure lowest possible cost of borrowing.

This is stated in the report Debt Dynamics in Fiji released by the Pacific Network on Globalisation and Third World Network.

“Fiji should maintain its status, and not be prematurely graduated from this classification, as an IBRDIDA Blend country and as a Country B member of ADB, given its inherent vulnerabilities in order to have access concessional finance despite being a middle-income country,” states the report.

“External borrowing on nonconcessional and commercial terms exposes the country to the vagaries of the market and its associated risks, including volatile market sentiments, sudden reversals in capital flows, high interest rates and exchange rate changes that could exacerbate the country’s debt standing.

“To keep the external debt composition as benign as possible, the government should stick to less risky terms with the lowest cost, and with conditionalities that do not run contrary to nationally-determined economic priorities, and respect the country’s policy space and autonomy.

“With regard to domestic debt, apart from reducing its issuances of short-term bonds (treasury bills) in favour of long-term bonds, the government could consider bond buybacks and bond switches to reduce the pressure on its resources, especially before significant debt payments are due.

“Given the significance of contingent liabilities to overall debt sustainability, the performance of state-owned enterprises should be monitored.”