IMF Wraps 2025 Article IV Consultation With Fiji

Washington, DC: On June 17, 2025, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation [1] with Fiji, and considered and endorsed the staff appraisal without a meeting.

The economic recovery continued in 2024. Staff estimates aggregate GDP growth in 2024 to have reached 3.7 percent. While employment has recovered to pre-pandemic levels, investment has recently been held back by labor shortages and supply-chain challenges. Inflation decelerated though 2024 as the impact of the 2023 value-added tax increase faded and the nominal exchange rate appreciated. The public debt-to-GDP ratio has continued to decline from the peak reached in 2022, but remains elevated, at 80 percent. Likewise, the current account balance has improved, but the deficit in 2024 is estimated to be around 6.7 percent.

Monetary and financial conditions remain accommodative, while the fiscal stance has tightened. The Reserve Bank of Fiji (RBF) has maintained the policy rate at 0.25 percent since early 2020. The fiscal stance tightened in FY2024, with the overall deficit declining from 7.2 percent of GDP in FY2023 (August-July) to 3.5 percent of GDP in FY2024, compared to a budgeted deficit of 4.8 percent of GDP.

Executive Board Assessment

In concluding the 2025 Article IV consultation with Fiji, Executive Directors endorsed staff's appraisal, as follows:

The economy has been recovering from the pandemic but is facing new setbacks. Growth is expected to fall in 2025, to about 2.6 percent, mostly because of slowing external demand, and to take a couple of years to recover to its medium-term potential rate. The baseline projection implies that public debt would remain elevated. In addition, FX reserve coverage would fall, implying that the external position remains moderately weak. Growth would be higher with successful structural reforms, or should the external environment be more favorable than assumed. But the balance of risks appears to be mostly to the downside, both in the near term, if trade tensions were to worsen or their effects be more severe than assumed in the baseline, or over the medium term, mostly given vulnerabilities to natural disasters.

Fiscal and monetary policies should focus on addressing macroeconomic imbalances.

• Fiscal policy should focus on lowering public debt while continuing with growth-friendly fiscal consolidation, oriented toward capital spending. Significant progress has been achieved in recent years, but additional adjustment measures are needed to put public debt on a clear downward path. Targeted and temporary social protection measures should be used to protect the vulnerable. Fiscal tightening would also contribute to reducing external imbalances.
• Over the medium term, given potential pressures on the exchange rate peg, monetary conditions should be gradually tightened, raising the policy rate and reducing excess liquidity.
• Financial policy should be attentive to emerging credit risks and to safeguard against money laundering risks.
• The authorities should avoid using exchange rate restrictions and CFMs in place of macroeconomic adjustment and focus on a gradual, sequenced capital account liberalization to support high long-run growth objectives.

Raising potential growth calls for sustained structural reforms.

• Progress has been achieved in enhancing the business environment and addressing near-term constraints to growth. Immediate concerns include addressing ageing infrastructure in electricity, water, and waste utilities, and improving the transport network and digital connectivity. Ongoing concerns include training and human capital. Successful measures would also encourage more foreign investment, ease external imbalances, and reduce "brain drain."
• As for other Pacific states, Fiji faces ongoing challenges from natural disasters and climate change. Increasing resilience adds to the motivation to shift away from current toward capital spending.

Such issues require sustained political consensus and good governance. The government's recognition of the importance of institutional reform, commitment to the rule of law, and reducing corruption and bribery is welcome. Recent legislative progress will need to be matched by proper enforcement and addressing capacity constraints in the civil service.

[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.