Agency expects moderate budget deficits to continue

Result of Government’s focus to lift spend on infrastructure & social services

RACHNA LAL
SUVA
Standards and Poor’s Ratings Services is expecting Fiji to continue to post moderate budget deficits.
In its latest report, the leading ratings, research and analytics agency said budget deficits have widened modestly in the past couple of years.
This, it said, was as the government focused on lifting spending on infrastructure and social services, which have improved as a result.
In the 2014 Budget, Government announced an estimated net deficit of $161.5 million which was 1.9 per cent of the GDP.
However, the agency said significant shortcomings in infrastructure and basic services remain, constraining the government’s budget flexibility.
“The present government currently projects deficits will gradually decline as a share of GDP,” the report said.
“However, we expect renewed opportunities for concessional borrowing from official sources, which democratic elections should bring, will see government borrowing rising slightly.”
The agency anticipates Fiji’s general government debt, net of liquid assets, to remain broadly stable as a share of GDP.
It has also revised Fiji’s rating outlook from stable to positive and affirmed their foreign and local currency credit ratings on Fiji at ‘B/B’.

Monetary policy
Standards and Poor’s considers the authorities’ monetary policy flexibility to be very low.
“Partly constraining its flexibility is its pegged currency arrangement, which requires the authorities to focus on exchange rate stability at the expense of stability in domestic prices and economic growth,” it said.
“Further limiting flexibility is the lack of effective monetary policy transmission to the economy, which is a result of Fiji’s underdeveloped financial system.
“Extensive foreign exchange restrictions are a further hindrance, although these have been gradually easing in recent years as official reserves were rebuilt.”
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