IMF says fiscal consolidation plan can put government debt on a sustainable path going forward

IMF says fiscal consolidation plan can put government debt on a sustainable path going forward

Bo Li, Deputy Managing Director of the IMF.

The International Monetary Fund said it advised the Fijian government to consider a medium-term fiscal consolidation plan to create space to better withstand external shocks in the future.

IMF Deputy Managing Director Bo Li said the fiscal consolidation plan can put public debt on a sustainable path going forward.

When asked at a press conference if the IMF was concerned about the increase in public debt in Fiji, Li said certainly and added that they had discussed it during their meeting this morning at the RBF. .

Li adds that at the same time given the increase in public debt over the past two years from 48% to more than 80%, there is a need to think in the medium term about how to make public debt sustainable.

He says now that the economy is rebounding, we need to think about how to make public debt sustainable.

Li adds that fiscal consolidation is part of that, but at the same time, fiscal reform is also important to put the economy on a sustainable growth path, so with proper economic growth coupled with fiscal consolidation fiscal, there will be a sustainable trajectory for public debt.

When asked further if the IMF sees as a clear priority restoring this fiscal space in anticipation of future external shocks, Li replies that this is exactly why they are suggesting medium-term fiscal consolidation, because for small developing countries like Fiji, too much public debt will make the country very vulnerable to external shocks, including international market turbulence and volatility.

Li says that is why they advised the Fijian government that with the economy rebounding, we need to think about a medium-term fiscal consolidation plan to create space to better withstand shocks in the future.

Asked about Fiji’s borrowing during the pandemic on concessional terms from multilateral development banks and bilateral creditors as well as the domestic debt profile, Li said 30% of Fiji’s public debt is external while that 70% is interior.

He says external debt on concessional terms will give Fiji some cushion to weather international volatility.

Li says that going forward, it is important that Fiji continues to secure concessional funding internationally.

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