IMF Staff Completes 2024 Article IV Mission to Fiji
IMF News, March 11, 2024
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- Published: March 11, 2024
Mission overview and headline findings
- IMF team led by Mr. Marshall Mills held discussions with the Fijian authorities and stakeholders in Suva and Nadi during February 28 to March 12, 2024.
- Growth: The economy is projected to grow by 3 percent in 2024, after expanding by 20 percent in 2022 and 8 percent in 2023; GDP has now surpassed 2019 levels, driven by a strong revival in tourist inflows, particularly from Australia and New Zealand.
- Inflation: Inflation is expected to fall to around 3 percent (yoy) by end-2024; inflation ticked up past 5 percent in 2023 partly due to the temporary mid-year VAT increase.
- External sector: The current account deficit narrowed sharply in 2023 to an estimated 4.7 percent of GDP and is expected to widen slightly to 6.3 percent of GDP in 2024.
- Reserves: Reserves covered 5.4 months of prospective imports at end-2023, supported by remittances and concessional donor financing.
- Fiscal and debt trends: Fiscal deficit expected to decline to 4.4 percent of GDP in 2024 (down from 5.9 percent in 2023). Public debt fell from a peak of 91.5 percent of GDP at end-2021 to 80.4 percent at end-2023.
Risks and challenges
- Downside risks:
- Unexpected global developments that would reduce tourist inflows.
- Domestic supply-side constraints, including labor shortages, delays in investment plans, and hotel capacity constraints.
- Upside inflation risks:
- An increase in global commodity prices.
- Higher shipping costs, wage pressures, and potential second-round effects of recent price upticks.
- Fiscal risks:
- The fiscal path under current policies reduces debt only slowly and could limit fiscal space to respond to future shocks.
- Structural and long-term challenges:
- Climate change, emigration, labor market skill gaps, infrastructure repair and maintenance needs, and financing/investment management for climate resilience.
Policy recommendations (macro and fiscal)
- Fiscal policy:
- Continue gradual fiscal consolidation to rebuild fiscal buffers while improving the targeting of social spending and prioritizing capital spending.
- Continue efforts to gradually enhance revenue and spending efficiency through better targeting and investment management.
- Strengthen public sector balance sheet via more careful controls over state-owned enterprises, including financial monitoring.
- IMF staff recommend achieving a primary surplus of around 2 percent of GDP by 2029, which – if sustained – would steadily reduce the debt to GDP ratio to 50 percent by 2034.
- Authorities target a continuing reduction in the public debt-to-GDP ratio (to 75.7 percent in 2027). IMF staff project that – without further measures – debt will decline only slowly to 78.6 percent of GDP by 2029.
- Monetary policy:
- Gradually normalize monetary policy stance toward neutral as the economy approaches potential output to create room to manage downside risks to price and external stability.
- Support normalization with a proactive communication strategy to effectively manage market expectations.
- Address persistence of high excess liquidity that has weakened monetary policy effectiveness and the monetary policy transmission mechanism.
- Financial sector:
- Reduce non-performing loans (NPLs) at all banks and strengthen financial sector oversight, particularly for banks with high NPLs.
- Address remaining recommendations from the 2018 Financial Sector Stability Review (FSSR), including review of the Reserve Bank of Fiji (RBF) and the Fiji Banking Acts.
- Continue strengthening AML/CFT framework by addressing weaknesses in entity transparency, beneficial ownership, and risk-based supervision.
- Structural reforms and growth:
- Implement a comprehensive, prioritized structural reform strategy; the National Development Plan under preparation and the multi-stakeholder Growth Reset Committee should play central roles.
- Prioritize addressing labor shortages in key sectors (professional services and construction), cutting red tape (immigration and permitting processes), accelerating access to power and renewable energy installation, and improving investment climate to stimulate private investment including FDI.
- Intensify efforts on education, technical training, and labor market reforms to enhance the labor force and facilitate female participation.
- Reinforce climate resilience, address financing and investment management challenges, and accelerate investment in renewable energy production to achieve Fiji’s target of 100 percent renewable production by 2036.
- The government’s recent climate finance initiatives welcomed by IMF staff include sovereign parametric insurance and a domestic “blue bond.”
Select economic projections and key statistics (Table 1 highlights)
- Real GDP:
- 2022: 20.0
- 2023: 8.0
- 2024 (Proj.): 3.0
- 2025 (Proj.): 3.4
- 2026 (Proj.): (blank in table)
- GDP deflator:
- 2022: 2.5
- 2023: 4.4
- 2024: 4.2
- 2025: 3.2
- 2026: 3.1
- Consumer prices (average):
- 2022: 4.3
- 2023: 2.3
- 2024: 4.0
- Consumer prices (end of period):
- 2022: 5.1
- Central government budget (percent of GDP):
- Revenue and Grants: 2022: 21.8; 2023: 24.7; 2024: 27.4; 2025: 27.3; 2026: 27.1
- Expenditure: 2022: 31.5; 2023: 30.6; 2024: 31.8; 2025: 31.7; 2026: 31.3
- Overall balance: 2022: -9.7; 2023: -5.9; 2024: -4.4; 2025: -4.3
- Primary balance: 2022: -6.0; 2023: -1.9; 2024: -0.4; 2025: -0.5
- Central government debt: 2022: 86.3; 2023: 80.4; 2024: 80.0; 2025: 79.6
- Central government external debt: 2022: 32.0; 2023: 28.1; 2024: 28.6; 2025: 28.5
- External sector (percent of GDP):
- Current account balance: 2022: -17.3; 2023: -4.7; 2024: -6.3; 2025: -6.8; 2026: -7.4
- Trade balance: 2022: -32.8; 2023: -29.7; 2024: -29.2; 2025: -28.8; 2026: -28.6
- Services balance: 2022: 11.7; 2023: 19.6; 2024: 19.2; 2025: 18.6
- Primary Income balance: 2022: -5.3; 2023: -5.2; 2024: -6.9; 2025: -7.2
- Secondary Income balance: 2022: 9.1; 2023: 10.2; 2024: 10.0; 2025: 9.9
- Capital account balance: 2022: 0.1
- Financial account balance (-= inflows): 2022: -13.9; 2023: -4.0; 2024: -4.9; 2025: -5.8; 2026: -6.26
- FDI: 2022: -1.8; 2023: -1.1; 2024: -3.5; 2025: -4.5; 2026: -5.4
- Other investment: 2022: -12.7; 2023: -3.9; 2024: -2.4; 2025: -2.2; 2026: -1.78
- Change in reserve assets (-=increase): 2022: -2.1; 2023: 0.6; 2024: 1.4; 2025: 1.0
- Gross official reserves (in months of prospective imports): 2022: 5.8; 2023: 5.4; 2024: 4.8
- Money and credit (percent change):
- Net domestic assets of depository corporations: 2022: 12.8; 2023: 11.3; 2024: 11.2
- Claims on private sector: 2022: 6.7; 2023: 7.6
- Broad money (M3): 2022: 3.6; 2023: 10.7; 2024: 7.8; 2025: 7.4
- Monetary base: 2022: 15.9; 2023: 7.3
- Interest rates (end of period):
- Central Bank Policy rate (end of period): 0.25
- Commercial banks deposits rate (end of period): 0.4
- Commercial banks lending rate (end of period): 5.2
- Memorandum items:
- Exchange rate, average (FJD/USD): 2.2
- Real effective exchange rate, average: 101.6 (2022); 101.1 (2023)
- GDP at current market prices (in millions of Fiji dollars): 2022: 10,963; 2023: 12,368; 2024: 13,275; 2025: 14,162; 2026: 15,104
- GDP at current market prices (in millions of U.S. dollars): 2022: 4,980; 2023: 5,498; 2024: 5,799; 2025: 6,109; 2026: 6,440
- GDP per capita (in U.S. dollars): 2022: 5,462; 2023: 5,994; 2024: 6,284; 2025: 6,581; 2026: 6,896
Engagement and acknowledgments
- The IMF team held discussions with the Deputy Prime Minister and Minister for Finance, Strategic Planning, National Development, and Statistics, Biman Prasad; the Governor of the Reserve Bank of Fiji, Ariff Ali; other senior government officials; development partners; and private sector representatives.
- IMF staff thanked the Fijian authorities for their cooperation and hospitality.
IMF Communications Department — Press Release No. 24/83 (March 11, 2024). Sources: RBF, Ministry of Finance, and IMF staff estimates and projections.