Reserve Bank of Fiji Governor and Board Chairman Ariff Ali says Fiji’s economic outlook continues to face mounting risks, with inflation expected to rise further if global fuel prices remain elevated and geopolitical tensions persist.
Mr Ali said higher oil prices linked to ongoing international conflicts could place additional pressure on household and business costs, while tighter financial conditions in major tourism markets may also affect visitor demand and foreign exchange earnings.
“Looking ahead, risks to the outlook remain,” Mr Ali said in the Overnight Policy Rate release.
“Inflation could rise further if global fuel prices stay high, while tighter financial conditions in key tourism markets may weigh on travel demand and reduce foreign exchange earnings.”
Domestically, Mr Ali said inflationary pressures are also expected to intensify in 2026 following the recent increase in electricity tariffs by Energy Fiji Limited.
“Inflation is also expected to rise further in 2026 following the recent increase of 5.91 cents per Unit in electricity tariffs by Energy Fiji Limited (EFL), which will raise operating costs for businesses and households,” he said.
According to the Reserve Bank, the combined impact of the EFL surcharge and higher fuel prices is expected to significantly influence inflation figures in the months ahead.
“The direct impact of the EFL surcharge and the fuel price increase in May is estimated to add around 0.5 percentage points and 0.9 percentage points, respectively to overall inflation,” Mr Ali said.
He also warned that Fiji’s foreign reserves could come under pressure if high global oil prices continue over a prolonged period.
“Regarding foreign reserves, a sustained period of elevated global oil prices and ongoing geopolitical tensions would increase fuel and freight costs, widen the trade deficit and exert downward pressure on reserves,” he said.
However, Mr Ali said Government’s planned offshore loan drawdown later this year is expected to provide some relief and help cushion reserve levels.
“Government’s expected offshore loan drawdown in the later part of the year will cushion it,” he added.
The Reserve Bank continues to monitor global developments closely as rising fuel prices, inflationary pressures and uncertainty in key tourism markets shape Fiji’s economic outlook.
