World Bank warns Fiji to cut debt urgently or risk stalling pandemic recovery

WELLINGTON (Reuters) – Fiji must take urgent action to reduce a debt burden that exceeds 90% of gross domestic product or put at risk its recovery from the COVID pandemic and plans for sustainable economic development, the World Bank said on Tuesday.

Debt has spiralled since 2019, as the tourism-dependent economy was hit by border closures against COVID-19 and tropical storms that lashed the Pacific island nation.

Despite authorities spending restraint during the pandemic, however, the sharp contraction in output drove up public spending as a share of GDP, the bank said in a report.

“Levels of (debt at) around 90% (of GDP) leave the country with limited buffers to address future shocks and highlight the scale and urgency of the fiscal consolidation required,” the bank said.

The comment came in a statement released along with the World Banks Fiji Public Expenditure Report 2023, sought by the government.

“This situation, combined with emerging global economic risks, threatens Fijis macro-fiscal stability, an essential foundation for sustainable economic and social development,” the report said.

Fijis government says its biggest lenders are the Asian Development Bank and World Bank, though it has outstanding loans from Chinese, Japanese and European Union lending institutions.

The World Bank report comes just as Fijis new government strives to get it back on a path of fiscal sustainability, said Finance Minister Biman Prasad, who is also deputy prime minister.

“The findings … will serve as an important consideration and input in this entire process of fiscal consolidation,” he said.

Sovereign debt is in focus after a renewed push to overcome the logjams followed a “roundtable” at the recent IMF spring meetings in Washington.

That prompted pledges from the Fund and World Bank to share assessments of countries troubles more quickly, provide more low-interest and grant funding, and set stricter timeframes on restructurings.

(Reporting by Lucy Craymer; Editing by Clarence Fernandez)