Fiji’s fiscal performance for the 2024-2025 financial year has ended on a high note, showcasing a remarkable improvement in its economic management. The fiscal deficit for the year has contracted to 2.4% of GDP, a notable decrease from the initial budget estimate of 4.5% and down from the previous year’s 3.4%. This marks the lowest deficit recorded since the fiscal year 2016-2017, reflecting effective fiscal discipline and an uptick in revenue.
Shamal Chand, a senior economist at Westpac Fiji, underscored this achievement as a positive sign although he cautions against complacency. He indicated that the outlook for the upcoming 2025-2026 financial year may face challenges, with projections suggesting an increase in the deficit and rising debt levels. It is essential, he notes, for the government to continue focusing on realistic budgeting and diversifying revenue streams to sustain fiscal stability.
The impressive fiscal results have been propelled by a record-high total government revenue of $4.05 billion, significantly exceeding both initial and revised forecasts. This growth is primarily due to a robust performance in tax collections, which saw a year-on-year increase of 12.2% to reach $3.48 billion. Corporate tax, VAT, and personal income tax all played substantial roles, particularly VAT which alone contributed an additional $173.4 million compared to the previous fiscal year.
Total government spending was managed effectively at $4.39 billion, which is 1.2% lower than earlier estimates. Specific areas of expenditure included $3.25 billion in operating costs and $1.06 billion in capital projects, both of which fell below what was forecasted. Such prudence in spending has historically led to a pattern of realized deficits being lower than projections.
Chand highlighted that this careful management has resulted in a reduced debt-to-GDP ratio of 77.1%, down from 79.0% the previous year, with domestic debt accounting for 64.8% of the total. However, the risks remain, particularly regarding the projected budget for FY2025-2026 which anticipates a deficit of $886 million or 6.0% of GDP—one of the largest in Fiji’s fiscal history.
Financial reserves appear robust, with the government holding nearly $900 million in deposits as of August. This liquidity provides flexibility for managing debt and addressing future economic needs, emphasizing a commitment to sustainable debt practices.
Overall, Fiji’s recent fiscal management reflects a commendable return to prudence and sets a solid foundation for future economic stability. As the government navigates the complexities ahead, maintaining discipline and enhancing revenue diversification will be pivotal in upholding resilience and fostering growth in the years to come. The focus remains on strategically investing in public services and infrastructure while supporting the well-being of its citizens, paving the way towards a hopeful economic future.