A team from the International Monetary Fund (IMF) recommends that with a strong economic recovery underway, government’s policies should focus on maintaining medium-term growth, rebuilding buffers and enhancing resilience.
Led by IMF’s mission chief for Fiji, Asia and Pacific Department, Marshall Mills, the team also highlights that key priority is to reinforce the balance sheet of the government to provide fiscal space to manage future shocks; the government should launch a medium-term fiscal consolidation, relying primarily on revenue mobilisation while promoting growth, private investment, and social inclusion.
“In this context, the team strongly welcomes the authorities’ commitment to ensure fiscal sustainability, reflected in the medium-term fiscal strategy and the recent appointment of the 2023 Fiscal Review Committee,” Mr Mills said.
He said the team recommended to front-load the fiscal consolidation with a comprehensive tax reform strategy in the forthcoming budget which would raise revenue, simplify the tax system, and enhances efficiency.
“Suggested measures include unifying the VAT rate at a slightly higher level; simplifying personal and corporate income taxes, especially by reducing tax exemptions; and raising certain excise and tourism-specific taxes.
“While tax reforms are necessary to raise revenue, they should be accompanied by targeted transfers to low-income households and growth-enhancing measures, such as cutting red tape.
“Spending should be disciplined and gradually re-oriented to boost growth, enhance resilience, and promote inclusion.”
Mr Mills said the team had fruitful discussions with the Deputy Prime Minister and Minister for Finance, Strategic Planning, National Development, and Statistics, Prof Biman Chand Prasad, Reserve Bank of Fiji governor Ariff Ali, other senior government officials, development partners, and private sector representatives.
