Wednesday, April 24, 2024
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Effective debt management is vital: Report

Fiji needs to redouble its effort to ensure its debt burden is on a sustainable path and the cost  of debt servicing is reduced.

A report published by the Pacific Network on Globalisation on ‘Debt Dynamics in Fiji’ reveals that the country’s unprecedented public debt has become the most pressing economic issue of the day.

The report highlighted that effective management of Fiji’s debt is vital in ensuring its economic resilience and long-term development.

Proposal to reduce burden –

With regards to domestic debt, the report states that apart from reducing its issuance of short-term bonds or treasury bills in favour of long terms, the Government could consider bond buybacks and bond stitches to reduce the pressure on its resources, especially before significant debt payments are due.

This means that this would be similar to the arrangement in which Fiji replaced its global bond for concessional finance from the Asian Development Bank and the World Bank in 2020, and consideration can be given to such options to reduce the debt burden in the medium term.

Also, the authors of the debt white document suggest that the Reserve Bank of Fiji can consider purchasing domestic government bonds from primary and secondary markets, especially when the government is faced with high pending debt payment obligations.

One of the key challenges for Fiji is mobilising new concessional financing for climate-related investments – Fiji was the first developing country to issue a green bond of US$50 million.

The coupon terms of the bond issued in domestic currency were at four per cent per annum and 13 years at 6.3 per cent with respect to maturities of 2022 and 2030.

Recommendation

The warning is that the Coalition Government has taken on the bitter pill of fiscal consolidation in order to put the brakes on the pace of debt accumulation and improve its sustainability.

They said the government will have to find a balance between keeping the lid on fiscal deficits, while prudently pushing ahead with the necessary spending and investments to ensure growth does not sputter.

They added that the government will continue to face difficult trade-offs between maintaining fiscal sustainability and investing in structural transformation, including productive investment, climate action and Sustainable Development Goal (SDGs).

The report was authored by Program Advisor with PANG Adam Wolfenden and Finance Analyst Chien Yen Goh.

Ilaitia Ravuwai
Ilaitia Ravuwai
Journalist | news@fijilive.com

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