So value added tax (VAT) is set to go down from 15 per cent to 12.5 per cent! That would have been the shocker yesterday! It was part of what Finance Minister Professor Biman Prasad has described as an expansionary budget with a total revenue of $3.9 billion, total expenditure of $4.8 billion, and a net deficit of $886 million, equivalent to 6.0 per cent of GDP.
In a budget that has ticked a lot of boxes for a lot of people, all social welfare recipients and government pensioners will receive a 5 per cent increase in their monthly allowances, and all civil servants will receive a 3 per cent pay rise.
Government will provide a 10 per cent bus fare subsidy for all Fiji citizens for a 12-month period starting from August 2025 to July 2026 at a cost of around $10m and students will continue to travel to school for free with blue cards. And the $200 Back-to-School Assistance will continue and will be paid in January 2026 before the start of the school year.
You could have heard sighs of relief across the country yesterday following the announcement of the 2025/2026 Budget.
Of particular interest was the fact that after years of widespread calls for a decrease in VAT, the Coalition Government finally responded yesterday, announcing the decrease which would be effective from August 1, 2025.
Prof Prasad said public debt is projected at $11.7b which is around 79.8 per cent of our GDP, about 10 per cent lower than what they inherited.
Government, he said, must have the money it needs to manage public debt. He emphasised the increase in VAT in the 2023-2024 Budget may have been painful, but it was necessary.
Additional costs were imposed on the business community, he said, with a rise in corporate tax to 25 per cent and the tourism industry had to bear the burden of increased departure tax. The measures helped to stabilise government finances, he said, and “begin the slow but necessary process towards sustainable public debt”.
Looking forward, there will be a lot of interest on allocations for education and health for instance, and on the spend on our police force now.
There can be no doubt about the importance of the national budget for our economic and social development.
From the outset, the budget reflects a strategy to stimulate economic activity.
More spending power should translate into higher sales and, ultimately, more revenue for Government through taxes, creating a positive cycle.
But as Consumer Council of Fiji CEO Seema Shandil rightly pointed out, the effectiveness of the VAT cut will depend on retailer compliance. When VAT was increased, prices quickly rose. Now that it’s being reduced, consumers must see those savings passed on at the checkout.
We say the coming months must involve strict monitoring to ensure that benefits are not lost. It must translate into visible savings for everyday consumers.
Understandably there will be many questions hanging.
However, the budget offers us a roadmap for economic stimulation and social equity. And now we wait for the debate in Parliament to begin!
