The International Monetary Fund Executive Board has commended Fiji for its strong economic rebound driven by the recovery in tourism. However, they have also warned of vulnerabilities that could impact the country’s economic outlook.

The IMF directors highlighted the risks associated with Fiji’s reliance on tourism, potential commodity price shocks, and the effects of climate change. They stressed the importance of maintaining sound macroeconomic management and addressing structural challenges related to fiscal buffers, resilience, and inclusive growth.

Authorities were praised for implementing revenue-enhancing measures in the 2024 budget to reduce the fiscal deficit, reverse the debt trajectory, and increase social spending. The IMF emphasized the need for continued fiscal consolidation to rebuild buffers, respond to future shocks, and reduce debt levels.

Directors also called for improved revenue mobilization, expenditure efficiency, and better targeting of social spending. Strengthening oversight of state-owned enterprises and the fiscal institutional framework was highlighted as crucial for Fiji’s fiscal sustainability.

With excess liquidity and a closing negative output gap, authorities were encouraged to gradually shift monetary policy to a neutral stance. The IMF recommended a proactive communication strategy and the development of a more effective monetary transmission mechanism.

The IMF directors advised reversing pandemic-related current account exchange restrictions and capital flow management measures. They also suggested phasing out pre-pandemic exchange restrictions while emphasizing the importance of enhancing financial sector oversight, especially for banks with high non-performing loans.