Praneeta Prakash 
[Photo: FILE]
Fiji may struggle to respond to its next major crisis as growing pressure on government finances limits its ability to handle unexpected shocks.
Permanent Secretary for Finance Shiri Gounder raised this concern during a panel discussion at the launch of the World Bank’s Fiji Economic Update.
He warns that both external shocks and major domestic problems could place further strain on the economy.
Gounder says any impact from HIV and drug challenges on tourism could leave the country facing serious difficulties.
“If we see the impact of this HIV drugs issue affecting our tourism industry, we have a serious problem in not being able to respond to the next crisis that may be around the corner which also includes our significant exposure to contingent liabilities to entities like the Fiji Sugar Corporation, where the government has guaranteed over $300 million in debt, plus their restructured cash flow deficit.”
Reserve Bank Governor Ariff Ali warns that tightening monetary policy could further slow growth and increase debt pressures.
“Growth has been slowing down, inflation has been driven largely by external factors. So it is something that I think the monetary policy should not respond to, and if we respond to it, growth will definitely go lower and debt levels could be higher because the government would have ended up paying. I think that’s the challenge over the next couple of years: how do you lift growth? The only way out of this is to lift growth.”
The Governor says fiscal and monetary policy must work together to support growth and maintain economic stability.
