Cost-of-living strain sparks cash over fiscal future

Fiji's economy is under significant strain, with rising debt levels, escalating cost-of-living pressures, and questions surrounding fiscal management igniting a sharp political confrontation. The central point of contention is whether the current government's economic policies are stabilizing the nation or exacerbating economic uncertainty.

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What the governor of the Reserve Bank said yesterday is directly the result of what happened in the last five months, and that’s the impact of the global fuel crisis. Now, what we did in the 2024-2025 budget, it was termed as an expansionary budget, and there are a number of policies that were implemented to prepare people for crises like this.

Government Member of Parliament Professor Biman Prasad defended the administration's economic approach. He attributed Fiji's high debt-to-GDP ratio to inheritances from previous governments and the impact of the COVID-19 pandemic. Prasad highlighted recent revenue reforms, such as consolidating VAT rates, as measures designed to close loopholes and prevent an estimated $400–$500 million in revenue leakage. He also pointed to the 2024-2025 budget as an "expansionary" plan with policies aimed at preparing citizens for crises like the global fuel crisis, which he cited as a reason for current affordability pressures.

However, former Finance Minister Aiyaz Sayed-Khaiyum strongly rejected the government's framing. He argued that fiscal measures have failed to significantly reduce debt and have instead intensified the burden on households. Sayed-Khaiyum criticized what he termed "unchecked operational expenditure" and questioned the government's reliance on external shocks as the primary explanation for the economic strain. He asserted that governance and policy credibility are crucial for restoring investor confidence, noting that nearly $1 billion in approved loans remains undrawn, which he interprets as a sign of weak confidence in the government's policy direction.

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Normally, prior to elections, and post elections, the private sector in particular always holds back to see what the policies are like, what will happen in the future. And that’s a challenge now.

Government MP Manoa Kamikamica maintained that the economic pressure is largely externally driven and that Fiji's economic fundamentals remain sound. He outlined the government's focus on long-term restructuring through diversification into sectors like agriculture, digital services, and infrastructure investment. Kamikamica pointed to an investment pipeline valued at approximately $8 billion and identified business process outsourcing as a high-growth potential area. He also stressed the importance of better utilizing land and natural resources to broaden economic participation, particularly for landowning communities.

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Fiscal measures have not translated into meaningful debt reduction and have instead increased pressure on households.