INTEREST payments on Fiji’s national debt absorb about $500million or 16 percent of all revenue, subsequently restricting the government’s ability to roll out significant capital infrastructure build, let alone implement nature conservation activities to protect its blue economy.
In light of that, and given that the grace period on some loans will expire over the medium term, three senior economists said Fiji may consider a debt for nature swap by refinancing its more expensive debt to cheaper debt, and use the savings on interest for climate and or nature projects.
ANZ Group international economist Dr Kishti Sen, senior economist Catherine Birch and senior international economist Tom Kenny’s research work published in the ANZ Pacific Insight obtained by The Fiji Times listed debt for nature swaps as a potential option for Fiji to raise funding.
Debt for nature swaps, according to the World Economic Forum, is a financial instrument that allows countries to free up fiscal resources to build resilience against the climate crisis, and take action to protect nature while still being able to focus on other development priorities without triggering a fiscal crisis.
In practice, the report noted “creditors provide debt relief in return for a government commitment to say, decarbonise the economy, invest in climate-resilient infrastructure, or protect biodiverse forests or reefs”.
“Essentially, countries are looking to swap more expensive debt, say by refinancing, for cheaper debt with the savings on interest used to fund climate mitigation and adaptation projects or for marine and forecast conservation,” the economists said.
“Several countries have adopoted this financing structure and used debt for nature swaps to fund nature conservation and climate projects.”.
The senior economists said Fiji’s debt that stood at $10.6billion as at October 30 last year was ecxpected to rise to $10.9b in 2024-25 or 78 percent of GDP.
About 30 percent of Fiji’s total debt is external debt comprising borrowings from multilaterals such as ADB, World Bank, Asian Infrastructure Investment Bank, overseas export credit agencies such as EXIM Bank of China, the Japan International Cooperation Agency, European Investment Bank and the Australian Infrastructure Financing Facility for the Pacific.
The economists said Fiji had not defaulted on its interest repayments, nor any suggestion that it was having difficulties servicing its debt.
“With the economy now making a ful recovery from the pandemic-induced recession, interest payments as a proportion of revenue have started to trend lower and have not increased in line with the higher stock of debt.
NOTE: This article was first published in the print edition of the Fiji Times dated FEBRUARY 17, 2025.
