A LARGE portion of the Government’s planned borrowings of $1.49billion will be directed toward higher interest payments, projected to be $534.5million in the 2025-26 fiscal year.
And with principal debt repayments projected to increase to $602m in the next financial year commencing August 1 this year, the trend – expected to continue – is putting further pressure on public finances in the medium to longer term.
Westpac Fiji senior economist Shamal Chand revealed this in the bank’s 2025-26 National Budget review, noting around 60 per cent of new borrowing will be used for $534.5m in interest payments, with the remaining going to capital spending component.
Mr Chand said the Government had set aside its fiscal consolidation strategy and planned to borrow $1.49bn in gross amount during the upcoming financial year, and would include $559.3m from external sources, and $928.7m from domestic markets.
Of the total borrowing, he said $602m was allocated for debt principal repayments, while $886m to be used to finance the projected net deficit, expected to reach 6 per cent of GDP.
“In the proposed financing plan, Fiji’s exposure to external borrowing is expected to increase too,” Mr Chand said.
“The net deficit will be financed 37.6 per cent from external sources and 62.4 per cent from domestic sources, up from 30.3 per cent external and 69.7 per cent from domestic sources in FY2024-25.”
He said that shift presented an increased exchange rate risk to the overall debt portfolio.
In the budget overview, Mr Chand noted with concern with what he said appeared to be the Government’s abandonment of its intention to remain on a path of fiscal consolidation – published in its Medium-term Fiscal Strategy 2025-26 some three months ago, with this budget “featuring a significantly higher net deficit of 6.0 per cent of GDP”. That, he said also marked the third-largest nominal net deficit in the country’s budget history.
However, he added: “It is possible the actual net deficit for FY2025-26 may be lower than projected, given the Government’s conservative revenue forecasts and tendency to overestimate expenditure.”
On the external financing front, Mr Chand the Government planned to borrow approximately $559m this year, which could help sustain foreign reserves at current levels.
But he said that was contingent on the successful realisation of the proposed external borrowing.
Borrowings for FY2025-26 will take total Government debt to a projected $11.70bn or 79.8 per cent of GDP by the end of July 2026, according to Government’s budget documents.
Note: This article was first published on the print version of the Fiji Times dated July 10, 2025
