The International Monetary Fund (IMF) has warned that Fiji’s economic recovery is facing fresh headwinds following the recent global oil price shock, with growth expected to slow in 2026 while inflation and external pressures increase.
In its latest Staff Assessment released on May 29, the IMF said higher fuel prices, softer tourism demand and growing uncertainty are expected to weigh on economic activity over the coming year.
“The recent oil shock will challenge Fiji’s ongoing recovery,” the IMF said.
According to the assessment, economic growth is expected to ease in 2026 as higher oil prices increase business and household costs, while inflation is projected to rise as fuel-related expenses filter through to domestic prices.
The IMF also warned that the oil shock would worsen Fiji’s current account deficit by increasing the cost of imports, particularly fuel, at a time when the country’s external balance is already under pressure.
The IMF Executive Board acknowledged Fiji’s continued economic recovery, driven largely by tourism and domestic demand, but noted that the outlook has become significantly more challenging.
“Fiji remains vulnerable to external shocks and natural disasters, while elevated public debt, widening external imbalances, and persistent structural bottlenecks continue to constrain policy space and weigh on living standards,” the Board said.
Directors stressed the need for Fiji to strengthen its fiscal position and rebuild buffers to better withstand future shocks. They cautioned that the current expansionary fiscal stance has increased fiscal and financing risks while public debt remains elevated.
The Board called for “gradual and growth-friendly fiscal consolidation” while ensuring targeted social assistance remains available to protect vulnerable households from rising living costs.
The IMF also urged continued improvements in public financial management, debt management and public investment capacity, saying stronger fiscal frameworks would improve transparency and policy credibility.
On monetary policy, Directors said Fiji’s exchange rate peg continues to serve the country well as a nominal anchor. However, they noted that persistently high excess liquidity in the banking system has weakened the effectiveness of monetary policy tools.
The Board welcomed ongoing efforts by the Reserve Bank of Fiji to strengthen its monetary policy framework and said this would require a gradual tightening of liquidity conditions and a gradual increase in policy interest rates.
Directors also encouraged authorities to progressively ease exchange restrictions and capital flow measures while ensuring external stability is maintained.
The IMF’s latest assessment comes as Fiji grapples with the economic fallout from a prolonged fuel supply crisis and rising global energy costs, adding pressure to households, businesses and government finances.
