World Bank Calls for Fiji to Strengthen Fiscal Buffers Amid Rising Economic Risks

The World Bank Group, in its first Fiji Economic Update issued from Suva, has urged the Pacific nation to rebuild its fiscal reserves as import costs rise and external shocks threaten its economy. The report, titled "Creating Fiscal Space to Accelerate Growth", was released in Suva on Wednesday and outlines a cautious outlook for Fiji’s economy. It projects that the country will grow by 2.1 % in 2026, recovering to 3.0 % by 2028."Public debt is expected to rise after declining from about 95 percent of gross domestic product (GDP) in 2021 to 76.9 percent in 2025," the World Bank notes, adding that recent policy measures and a new external shock have begun to reverse earlier fiscal gains.Fiji’s dependence on imports has exposed it to higher costs for global fuel, freight and insurance. Rising energy prices are pushing prices higher across key sectors, which in turn is squeezing household purchasing power and putting additional pressure on businesses.While the country faces these challenges, strong remittance inflows, adequate foreign reserves and banking system liquidity continue to provide economic buffers, the Bank said.The report also underscores risks from a widening trade deficit and the threat of El Nino impacts on agriculture and water resources. It stresses the need for prudent fiscal management to sustain growth and create jobs.Fiji’s new fiscal policy has managed to bring the debt‑to‑GDP ratio down to a low of 76.9 percent in 2025 after a steep decline from 95 percent in 2021. However, the World Bank warns that the trend is rolling back after recent external shocks. The cost of imports has risen, driven by increased fuel, freight and insurance expenses on a global scale, which the Bank sees as a key contributor to inflation.Inflation is climbing, squeezing household budgets and making businesses’ operating costs higher. The Bank highlights that a significant portion of the economy relies on imports, which makes Fiji especially vulnerable to price fluctuations in Britain, China and the United States.Despite these risks, the report points to economic buffers such as strong remittance inflows and foreign‑reserve holdings. The Bank indicates that the country’s banking system remains liquid, offering some protection against immediate shocks.The warning also draws attention to a widening trade deficit, an issue that has worsened in recent years as imports continue to outpace exports. The Bank adds that such a deficit could stress Fiji’s external accounts further, especially if El Nino events disrupt agriculture and water supplies.El Nino, a natural climatic cycle that can bring heavy rainfall and flooding, could affect key sectors that rely on consistent water flows, such as agriculture. The Bank frames this as a risk for national development and for the employment of Fiji’s large rural workforce.The World Bank’s findings echo concerns from earlier warnings about the need to streamline public spending and maintain prudential fiscal policies. It also suggests that the country could benefit from a clearer strategy to manage trade deficits, boost domestic production, and reduce reliance on imports for high‑margin goods.In short, the Bank stresses that while growth prospects remain moderate, Fiji must restore fiscal reserves to protect the economy against imported price shocks, a rising trade deficit, potential El Nino impacts and the gradual reincrease of public debt.The recommendations point to a cautious path: building fiscal space, managing inflation, and diversifying exports to lessen dependence on imports. If implemented, these measures could help the country sustain its modest growth path and continue to create jobs for its citizens."}