The International Monetary Fund's Executive Board has completed its Article IV consultation for Fiji, concluding that the economy remained resilient through 2025 but faces a more difficult outlook after the recent oil shock. Staff estimate real GDP growth at 3.2 percent in 2025, supported by tourism, remittances and fiscal stimulus, before slowing to 2.4 percent in 2026 as higher oil prices, softer tourism demand and elevated uncertainty weigh on activity. Inflation fell sharply on temporary value added tax cuts and lower duties on selected essential goods, but is expected to rise again as those effects fade and fuel costs feed through to domestic prices, while the current account deficit is set to widen. Executive Directors backed a policy response focused on rebuilding fiscal buffers and strengthening resilience. The FY2025-26 budget targets an overall deficit of about 6.5 percent of GDP at a time of elevated public debt and financing risks, prompting calls for gradual, growth-friendly fiscal consolidation alongside targeted social assistance and stronger public financial management, debt management and public investment capacity. Directors said the exchange rate peg continues to serve Fiji well as a nominal anchor, but persistent excess liquidity has weakened monetary transmission, warranting gradual liquidity normalization and policy rate increases from the Reserve Bank of Fiji's current 0.25 percent. They viewed the financial sector as broadly sound, with banks well capitalized and liquid, but urged continued vigilance, gradual easing of exchange restrictions and capital flow measures while safeguarding external stability, stronger AML/CFT and supervisory frameworks, and structural reforms on infrastructure, labor shortages, outward migration, private sector barriers, climate resilience, governance and the rule of law. Fiji has consented to publication of the staff report, which the IMF said will be released shortly on its Fiji page.
International Monetary Fund2026-05-29
International Monetary Fund completes Fiji Article IV consultation and warns oil shock will slow growth and widen external deficit
The IMF Executive Board concluded its Article IV consultation for Fiji, noting resilient 2025 growth but a weaker outlook after the oil shock, with inflation and the current account deficit set to rise as temporary tax cuts fade and fuel costs increase. Directors backed gradual, growth-friendly fiscal consolidation to rebuild buffers, liquidity normalization and policy rate hikes from the Reserve Bank of Fiji’s 0.25 percent, and easing of exchange restrictions and capital flow measures while safeguarding external stability. They urged stronger public financial and debt management, AML/CFT and supervisory frameworks, and structural reforms to tackle infrastructure gaps, labor shortages, outward migration, private sector barriers, climate resilience, governance and rule of law.