Fiji’s 2025–26 National Budget embraces an assertive approach to economic management. With a projected deficit of FJD886 million (approximately 6% of GDP) the government has chosen to prioritise recovery, stability, and long-term national investment at a time of continuing global economic uncertainty. Deputy Prime Minister and Finance Minister, Professor Biman Prasad has framed the budget as a deliberate and responsible decision to stimulate growth and protect households from inflationary pressures. While some commentators have raised questions about the risks involved in this fiscal strategy, the budget also reflects a commitment to tackling deep-rooted infrastructure challenges, delivering social support, and positioning Fiji for stronger, climate-resilient growth.

A budget for recovery and investment

At the heart of this budget lies a recalibration of national priorities. A substantial share of the fiscal gap arises from the government’s decision to reduce VAT from 15% to 12.5%, offering direct relief to households and potentially boosting consumer confidence. Alongside this, there has been a notable increase in operating expenditure, driven in large part by public sector wage adjustments, targeted social support, and funding for essential services.

What stands out is the government’s continued focus on capital investment. With over FJD926 million committed to infrastructure projects, the aim is to build the foundations for sustainable economic development. From road and bridge rehabilitation to water system upgrades and energy expansion, the allocation is not only a response to current needs but an effort to address infrastructure gaps that have long limited productivity and service delivery.

While the resulting deficit is the largest in recent years, the structure of spending indicates that Fiji is not borrowing simply to maintain consumption, but to drive long-term transformation. That distinction is critical in assessing the wisdom and sustainability of the government’s approach.

Managing debt while supporting growth

Fiji’s current debt-to-GDP ratio stands at around 79.8%, having decreased from a post-pandemic peak above 90%. While still elevated by historical standards, this figure reflects the impact of large-scale Covid-era borrowing and the continued need for fiscal stimulus. The government’s financing strategy relies on a mix of domestic borrowing and concessional loans from development partners that carry lower interest rates and longer repayment periods than commercial debt.

Much of the concern around the deficit relates to potential exposure to external shocks and rising interest rates globally. However, the government has so far demonstrated discipline in sourcing funding through manageable channels. The challenge will be to sustain that approach, avoiding overreliance on short-term debt and maintaining confidence among investors and lenders.

A key factor in debt sustainability will be the performance of Fiji’s core economic sectors. With tourism’s recovery and remittances continuing to rise, the country is on a more stable growth trajectory. Still, the global economic environment remains unpredictable. This makes it all the more important that fiscal policy remains agile and that debt-servicing plans are underpinned by clear revenue strategies and cost-effective project implementation.

Making stimulus measures work for the long term

The budget’s expansionary posture is a calculated bet on growth – one that aims to improve both the supply and demand sides of the economy. Public sector pay rises and increased welfare support are designed to ease cost-of-living pressures while stimulating domestic consumption. On the supply side, investments in infrastructure are intended to remove bottlenecks and improve access to basic services, particularly in underserved areas.

However, for the fiscal stimulus to succeed, its outcomes must be measurable. It is critical that major capital projects are accompanied by strong accountability mechanisms and transparent reporting on their impact. A new generation of infrastructure should not only create jobs in the short term, but also enhance long-term productivity, resilience, and access to opportunity.

Government agencies must also ensure that the revenue base is protected and modernised. The implementation of the VAT Monitoring System is a positive step in this direction. Strengthening tax compliance and broadening the tax net can help Fiji gradually rebuild fiscal space while keeping its commitments to equity and economic inclusion.

Staying the course with discipline and flexibility

A bold budget demands steady execution. The government’s current approach reflects an understanding that extraordinary times require bold measures but also a recognition that such measures must be carefully managed. Fiscal transparency, institutional efficiency, and a willingness to adapt policy in response to changing conditions will all be vital in navigating the months ahead.

Fiji now has an opportunity to turn this fiscal stance into a platform for long-term economic transformation. By combining responsible borrowing with a clear focus on productive investment and inclusive growth, the country can build resilience not just to economic shocks, but to the climate and development challenges that lie ahead. If implemented with care and discipline, this budget could well prove to be a turning point, setting the nation on a path to stronger, fairer, and more sustainable growth.


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