Fiji Budget: A focus on debt sustainability

The drive to reducing Fiji’s debt underpins many of the measures included in the 2023-2024 Fiji budget, with the coalition government hoping to bring it down to 79% of GDP by July 2024.

Government debt is projected to reach $9,882.3 million (81.2% of GDP) by the end of July 2023, with Deputy Prime Minister and Minister for Finance, Biman Prasad, this morning telling the house, “We inherited a public debt of close to $10 billion dollars, almost the size of our entire economy. In the upcoming financial year, we must find a staggering $1 billion dollars to service this debt. That is about $536 million dollars for interest payments and another $516 million dollars for principal repayments alone.

“In other words, almost one dollar out every four in this Budget must now be spent servicing Government debt.”

-Deputy Prime Minister and Minister for Finance, Biman Prasad

The government’s current debt comprises:

  • $6,218.2 million in domestic debt
  • $3,664.1 million in external debt

29.2% of the external debt is concessional loans. Budget documents note that the appreciation of the US dollar against the Fiji dollar has also contributed to increased external debt.

The government says refinancing risk (measured using Average Time to Maturity) is stable at ten years, indicating that “the Government has more time to settle all of its debt.”

Through the budget, the government is seeking to:

  • Lower the cost of debt through concessional funding from bilateral and multilateral lenders;
  • Change the maturity profile through a gradual reduction in Treasury Bills and issuances of short and medium-term bonds to finance deficits;
  • Continue issuance of long-term bonds
  • Develop the domestic and market to focus more on transparency, secondary market trading, settlement mechanisms and investor diversification
  • Consider call-backs, bond buybacks and switch operations, and
  • Minimise risks associated with on-lending and contingent liabilities

Debt by lenders

Domestic debt (millions, as of April 2023)

FNFP Retirement Income Fund3,517.9
FNPF Special Death Benefit Fund68.5
Insurance Companies845.5
Commercial banks234
Trust Fund21.5
Unit Trust of Fiji20.4
Merchant Finance2.1
Kontiki Finance50.6
Commercial banks272.1

Source: Budget supplement 2023-24

Loans/External debt (millions, as of April 2023)

Asian Development Bank1,417.4
Asian Infrastructure Investment Bank224.6
Exim Bank of China *374.9
Japan International Cooperation Agency *420.2
World Bank- International Bank for Reconstruction and Development407.6
World Bank- International Development Agency678.8
European Investment Bank19

*Fixed rate loans. All others are variable.

The government will publish its Medium-Term Debt Management Strategy next month.