The International Monetary Fund has suggested that if the Government wants to reduce Fiji’s debt level, it should reform its VAT policy among a few others.
This, at the same time, provides income support to the most vulnerable and growth enhancing structural reforms.
IMF Team Leader Marshall Mills says Fiji is experiencing strong economic recovery after the pandemic, however, the risk to the outlook are tilted to the downside.
Mills said Fiji’s high deprives it of the fiscal space to respond to shocks.
“The country remains vulnerable to weaker growth in advanced economies that would reduce tourist inflows and remittances. Renewed acceleration in global commodity prices and growing skilled labour shortages could revive supply-side inflationary pressures.”
Mills said Fiji is also highly vulnerable to frequent natural disasters, particularly tropical cyclones.
He said on the upside, reduced policy uncertainty could help jumpstart private investment and continuing momentum in tourist inflows could sustain above-trend economic growth in the near-term.
“With a strong economic recovery underway, policies should focus on maintaining medium-term growth, rebuilding buffers, and enhancing resilience. The key priority is to reinforce the balance sheet of the government to provide fiscal space to manage future shocks; the government should launch a medium-term fiscal consolidation, relying primarily on revenue mobilization while promoting growth, private investment, and social inclusion,” the IMF added.
