Fijians could face reduced funding for essential services such as housing, hospitals and education as rising debt servicing costs and financial pressures at the Fiji Sugar Corporation, alongside Government exposure to other state-owned enterprises including Fiji Airways, put pressure on public finances.
This has been highlighted by Permanent Secretary for Finance Shiri Gounder during a panel discussion after World Bank Group Senior Economist Tihomir Stucka questioned what a credible path for Fiji would be to stabilise and eventually reduce its public debt.
Gounder says FSC is facing an extremely serious financial situation, with the Government guaranteeing more than $300 million in its debt and recently meeting the corporation's structural cash flow deficit.
He warns that if FSC's financial situation continues to deteriorate, the full fiscal exposure from its debt could fall on the Government.
He says rising debt servicing costs are reducing the amount of taxpayer money available for essential services, including housing, hospitals and education, and could also limit the Government's ability to respond to a future crisis.
Insert: Gounder on possible next crisis 29th Oct
Gounder says Government expenditure has grown by almost 40 percent in recent years, with a significant increase in operating expenditure contributing to a structural fiscal deficit of 7 percent this year.
He warns that without changes to the current approach, the Government could struggle to finance its budget.
Gounder says the growing fiscal deficit is also contributing to pressure on the current account and balance of payments, with exports remaining stagnant while imports continue to rise.
He says the Government needs to control expenditure growth and redirect funding from low-impact areas towards more productive investments.
Gounder also calls for a review of the size of the public sector, better targeting of social spending and subsidies, and measures to improve tax compliance and government revenue.
He says growing the economy and supporting the private sector would be the least painful way to address the country's fiscal challenges.
