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IMF urges authorities to pursue sound macroeconomic policies for sustained growth

  The International Monetary Fund (IMF) says Fiji’s accommodative policies and delays in reform implementation could lead to decline in economic growth. This was one of the conclusions made by
27 Feb 2016 19:14
IMF urges authorities to pursue sound macroeconomic policies for sustained growth

 

The International Monetary Fund (IMF) says Fiji’s accommodative policies and delays in reform implementation could lead to decline in economic growth.

This was one of the conclusions made by the IMF in its Article IV consultation with Fiji on February 5.

IMF has encouraged authorities to pursue sound macroeconomic policies and implement structural reforms to generate sustainable, inclusive growth.

IMF also concluded that despite some recent moderation, credit growth has remained strong, reflecting in part the accommodative monetary conditions, improved business confidence, and pent-up demand for credit.

“The 2015 fiscal deficit is estimated at 3.2 per cent of GDP and key budget targets have been met, but slower execution of capital projects contributed to a smaller deficit,” it said.

“As a result of the shift in capital spending from 2015 to 2016, the fiscal deficit is projected to increase to 4.3 percent of GDP in 2016, and consolidation has been deferred to 2017.”

Public debt is sustainable, and is forecast to gradually decline over the medium term. Foreign exchange reserves remain adequate, according to IMF.

The IMF suggested the authorities continue to make progress in several structural reform areas, with a view to lowering the cost of doing business and improving the overall business climate.

“However, much scope for further liberalisation remains, including with regard to consumer prices and exchange controls,” it said.

“Efforts in these areas and continued impetus on structural reforms would also help sustain broad-based inclusive growth.”

 

Executive Board Assessment

Executive Directors noted that risks to growth remain, and derive mostly from external developments.

The directors emphasised the need for a growth-friendly fiscal consolidation to build buffers and maintain sustainability.

They commended the authorities’ focus on addressing public infrastructure gaps, and recommended prioritisation of capital projects and social spending while containing current expenditure.

They welcomed efforts to broaden the tax base and strengthen administration.

Directors also commended the successful refinancing of external sovereign debt, which reflected favorable market conditions and an improvement in Fiji’s macroeconomic fundamentals.

Feedback:  christine.nikola@fijisun.com.fj

 

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