Offshore borrowing has cushioned the impact on foreign reserves without which it would have led to a possible devaluation – Koya

The Acting Minister for Economy, Faiyaz Koya says offshore borrowing has cushioned the substantial impact on foreign reserves without which it would have led to a possible devaluation of the Fijian dollar and significantly impacted the Fijian financial system.

Koya says the recent increase in the debt which is projected to be to 84% of  GDP is mainly due to the fact the government revenue is down by 50% from pre-COVID-19 levels.

He says this temporary increase in government borrowing is needed to provide much needed fiscal impetus to create jobs, to develop infrastructure and continue to provide essential government services and this is critical for economic stability and lays the foundation for a very quick recovery for Fiji.

Koya says government has borrowed sustainably from some of the most credible multilateral and bilateral institutions such as JICA, the World Bank and the Asian Development Bank.

The Minister says these credible agencies lending to Fiji at this point in time reflects the legitimacy of the need for the government to support the economy.

Koya also says that this shows that the lenders are confident in the Fijian government’s ability to repay these loans and the country has never defaulted on any debt payment.

He says this has ensured that the government programs and civil servants salaries are maintained and not substantially impacted.

Koya says setting the dept to GDP ratio on a downward trajectory will be a key focus post-COVID and will largely be dependent on the quick rebound and progressive reduction in the budget deficit over the medium term.

The Minister adds that while debt for financing growth is warranted during this extraordinary time, the sustainable long term growth will be led by private sector that will bring down the GDP ratio.

He has also highlighted that foreign reserves stands at about $2.2 billion that is sufficient to cover 6.8 months of retained imports and it is likely to remain strong in the future.

In response to SODELPA MP, Niko Nawaikula’s comments on government borrowing, Koya says Nawaikula knows about these loans as it was approved by parliament in the 2020-2021 National Budget.