- With the Fijian economy facing new headwinds, growth is projected to moderate to around 2½ percent in 2026, while average inflation for the year is expected to increase to over 2 percent.
- The main policy challenge is to rebuild fiscal buffers, so as to provide room to cope with future macroeconomic shocks, while also increasing much-needed capital spending. Social assistance measures targeting the most vulnerable would be the best response to fuel price pressures.
- Other priorities include improving the monetary policy framework and advancing structural reforms to raise potential growth rates.
Washington, D.C.: An International Monetary Fund (IMF) team led by Mr. Alasdair Scott held discussions with the Fijian authorities and other stakeholders in Nadi and Suva from March 16 to 27, 2026. At the conclusion of the visit, Mr. Scott issued the following statement:
“Economic activity remained resilient in 2025, supported by strong tourism inflows, continued remittances, and fiscal stimulus. This momentum has begun to ease into early 2026. Tourism already appeared to be softer for the first part of this year. Now higher global oil prices are weighing on the outlook.
“Given these headwinds, the IMF team forecasts growth in 2026 at around 2½ percent, which would be weaker than in recent years. Inflation is expected to increase to around 2¼ percent.
“Risks to the outlook are to the downside. They arise primarily from fiscal financing pressures, which could raise borrowing costs, constrain spending, and increase pressures on external balances and reserves. Moreover, global fuel prices could increase by more than assumed in these projections, passing through to still-higher inflation and a weaker external position. Tighter global financial conditions could increase the cost of external financing. In addition, structural constraints and vulnerability to natural disasters continue to weigh on medium-term growth prospects.
“Policies need to address both near term and medium-term challenges.
“The budget passed last year leaves the government with very little room to handle unexpected needs for extra spending. While the economy now faces higher fuel prices, in the future it could also face natural disasters or new global shocks. The challenge for fiscal policy is therefore to rebuild fiscal buffers with growth-friendly reductions in deficits, while managing higher costs of living. This could be facilitated by a reform package of revenue mobilization—building on excellent progress on compliance by the Fijian Revenue and Customs Service, but also including restoring the VAT rate to its previous rate—and expenditure rationalization.
“To support those most vulnerable to fuel price increases, targeted social assistance is the best option. Untargeted subsidies or price caps would be very expensive for the government and would provide less help to the most vulnerable.
“The needed fiscal adjustment could be made growth-friendly by increasing public spending on development and infrastructure. The quality of public spending is also crucial, and further increases in the size of the government should be avoided.
“The exchange rate peg maintained by the Reserve Bank of Fiji continues to serve the economy well. That said, the effectiveness of monetary policy could be improved by strengthening the links from the policy interest rate to retail rates. This would require a gradual normalization of liquidity conditions and interest rates.
“The banking system remains sound overall, with adequate capital and liquidity buffers and improving asset quality. Credit growth has remained strong, particularly in housing and unsecured lending, and should continue to be monitored closely for signs of increases in bad loans. Strengthening the AML/CFT framework remains very important—continued engagement in the APG mutual evaluation process will help to identify and address weaknesses.
“Structural reforms are needed to support medium-term growth and resilience. The authorities’ strategy, as set out in the National Development Plan 2025–29 and Vision 2050, appropriately focuses on raising productivity, strengthening human capital, and scaling up investment to support the transition to high-income status. However, implementation has lagged. Achieving stronger and more durable growth will require clearer prioritization and sequencing of reforms, improved implementation capacity, and sustained efforts to mobilize public and private investment, particularly in climate-resilient infrastructure.
“The team had fruitful discussions with the Minister for Finance, the Honorable Esrom Immanuel, the Governor of the Reserve Bank of Fiji, Ariff Ali, other senior government officials, development partners, and private sector representatives. The team would like to thank the Fijian authorities for their excellent cooperation and hospitality.”
read more: https://www.imf.org/en/news/articles/2026/03/27/pr26093-fiji-imf-staff-completes-2026-article-iv-mission
