IMF says a fiscal consolidation plan can put Govt debt in a sustainable path moving forward

The International Monetary Fund says it has been advising the Fijian Government to think about a fiscal consolidation plan in the medium term to create space to withstand external shocks better in the future.

IMF Deputy Managing Director Bo Li says the fiscal consolidation plan can put government debt in a sustainable path moving forward.

When asked at a press conference if the IMF was concerned about the rise in public debt in Fiji, Li said certainly and added that they discussed it in their meeting this morning at the RBF.

Li adds that at the same time given the rise in public debt in the last two years from 48% to more than 80%, we have to think about in the medium term how to make public debt sustainable.

He says now that the economy is rebounding, we have to think about how to make public debt sustainable.

Li adds fiscal consolidation is one part of it but at the same fiscal reform is also important to bring the economy into a sustainable growth path so that with proper economic growth together with fiscal consolidation, there will be a sustainable path for public debt.

When further asked if the IMF sees a clear priority for re-establishing that fiscal space in anticipation for future external shocks, Li says this is exactly why they are suggesting a fiscal consolidation in the medium term because for small developing countries like Fiji, too much public debt will make the country very susceptible to external shocks including turbulence and volatility in the international market.

Li says this is why they have been advising the Fijian Government that with the economy rebounding we need to think about a fiscal consolidation plan in the medium to create space to withstand shocks better in the future.

When asked about Fiji's borrowings in the course of the pandemic on concessional terms from multilateral development banks and bilateral creditors as well the domestic debt profile, Li says 30% of Fiji's public debt is external while 70% is domestic.

He says the external debt on concessional terms will give Fiji some cushion in dealing with international volatility.

Li says going forward it is important that Fiji continues to secure concessional financing internationally.