Fiji’s 2026-27 National Budget has a clear philosophy behind it to pare back operating expenditures over time to reduce the deficit.
However, there is a pivot towards more public investment with a new $FJ2,000m public infrastructure pipeline of projects in renewable energy, ports and airports announced.
Changes to government subsidies, tax concessions, tax rates and superannuation settings are modest, allowing for continuity of policy and certainty around the legislative agenda.
This will help build confidence in the country amongst private capital investors.
There is some urgency on the part of the government to coordinate development in partnership with the private sector.
Microeconomic reforms such as ‘eliminating red tape’ to fast-track investment approvals will be welcomed by investors, both domestic and overseas.
The budget sees next year’s total expenditure (that is, day-to-day operating plus capital) rising in line with inflation (4 per cent) to $FJD4,870m. Revenue is projected to come in lower by 1.8 per cent to $FJ3,824m due to slower GDP growth of 1.5 per cent in 2026, with a moderate pick-up to 2.5 per cent in 2027 versus average growth of 3.3 per cent in the last two years.
Taken together, official estimates see the net deficit moving from $FJ776m (-5.5 per cent of GDP) in 2025-26 to $FJ1,046m in 2026-27 (-7 per cent).
With another $FJ1,046m borrowing requirement, Fiji’s debt level is expected to rise from $FJ11,538m (82.1 per cent of GDP) to $FJ12,583m (84.8 per cent of GDP) in 2026-27.
Based on forward estimates, the net deficit is expected to improve to $FJ974m (-6 per cent of GDP) by 2028-29 (Figure 1).
As ever, execution will be important to deliver on the projected outcomes.
Seeking efficiency savings from the operational component of public expenditure will need to continue over the medium term to return the budget to a structurally balanced state.
Overall, we view the budget as sound, with a better outcome, for debt-to-GDP ratio, likely based on better economic and revenue performance.
That would please lenders, development partners and credit ratings agencies.
$FJ2,000m public investment pipeline unveiled
The Coalition Government plans to lift the productive capacity of the economy by announcing a $FJ2,000m infrastructure spend on new projects.
This will be done in partnership with key state-owned enterprises.
Projects are earmarked to support the transition to renewable energy, to transform and redevelop Suva port and to upgrade Nadi International Airport.
There is an initial $FJ100m allocation for these strategic investments for next fiscal year and total capital spending in 2026-27 is up 10.5 per cent to $FJ876m.
Incentives are also provided for the private sector to build more sporting stadiums, fuel-storage tanks, cement factories and mahogany mills.
Tax deductions have been provided for associated private sector investments.
A conservative budget based on worst-case economic growth assumptions
The budget assumed a worst-case set of economic assumptions to project revenue.
The forecasts assume real GDP growth of 1.5 per cent in 2026 with nominal GDP rising of 4 per cent versus baseline assumptions of 3 per cent and 5.5 per cent, respectively, for 2026.
The worst-case scenario assumes a “period of heightened external and domestic challenges, including weaker global growth, natural disasters and lower investor confidence”.
We forecast real GDP growth will come in stronger than the budget is forecasting.
The global economy has been resilient to the oil price shock, and we expect world GDP to increase by 3.1 per cent this year strengthening to 3.4 per cent in 2027.
In addition, Fiji has a stabilising factor, in the form of overseas remittances, which help to stabilise household consumption.
During natural disasters and the COVID-19 pandemic, friends and families working abroad often sent part of their earnings back to Fiji.
Remittances this year are tracking higher than the record $FJ1,200m receipts in 2025.
In addition, tourists are still coming to Fiji in large numbers, with visitor arrivals up 2.3 per cent on last year, helping sustain jobs in the tourism industry.
Farmers are also receiving good returns on agricultural produce, with export revenue up 5 per cent on last year.
So, consumer demand is still well supported and private investment is holding up well.
We are forecasting real GDP growth of 2.7 per cent in 2026 and 2027 before strengthening to 3.2 per cent in 2028.
If realised, government revenue will come in higher than budgeted and that should see a lower deficit and debt for the 2026-27 fiscal year.
Conclusion
Overall, the government faces competing priorities and cannot solve all the economy’s challenges at once.
That said, the budget aims to rein in operational expenditure over time.
It adopts a prudent fiscal approach to address the structural deficit by controlling operating expenditure.
Maintaining this process of budget repair and fiscal discipline over the medium term will help ensure Fiji’s public finances return to greater balance.
Containing the rise in the debt-to-GDP ratio is important for maintaining sound public finances and creating fiscal space in the future.
As Fiji further unlocks its resources (land and human capital) to power its agriculture and emerging industries like business process outsourcing, we think growth will play a significant role in driving an improved fiscal position.
n DR KISHTI SEN is the senior Pacific economist for the ANZ Bank Group. The views expressed in this article is his and does not necessarily reflect the views of this newspaper.
