‘FIJI’S ECONOMY IS ON THE RECOVERY PATH’
The public debt debate in Fiji cannot happen in isolation and it cannot be detached from the COVID-19 crisis and Fiji’s economic and fiscal response to the crisis in the last two years.
The recent increase in public debt and the COVID-19 crisis are intrinsically linked and this contextualization is critically important to undertake any meaningful analysis on public debt. Prior to COVID-19 the debt to GDP was on a downward path and below 50 percent of GDP.
Then we had the COVID-19 crisis a once in a 100 year event which had a devastating impact on the Fijian economy, jobs, socio-economic conditions and Government finances. Fiji has never ever had an economic crisis of this magnitude and this prolonged and this was not only peculiar to Fiji but almost every single country in the world struggled.
Following the COVID-19 induced economic devastation and the massive decline in tax revenues by almost 50 per cent, public expenditure had to be maintained near pre-pandemic levels to ensure no major disruption in the delivery of government services and to also fund the large unemployment support and relief payments of almost $500 million to assist those affected. Other expenditures like civil service salaries, funding support to the health sector and spending on infrastructure and public utilities continued.
The multilateral agencies like the World Bank, Asian Development Bank, Asian Infrastructure Investment Bank and bilateral partners like the Japan International Cooperation Agency, Australia and New Zealand supported with highly concessional financing and budget support grants which reaffirmed that the fiscal response to the crisis was appropriate and the alternative of not borrowing would have been catastrophic for the economy and would have further worsened the socio-economic challenges.
As we now come out of the crisis, and the economy is on the recovery path, public debt to GDP ratio will be put on a downward trajectory as part of Government’s medium term fiscal strategy.
A mix of policies ranging from supporting a private sector led economic recovery, tax reforms, expenditure readjustment and other broader public sector reforms will be pursued.