World Bank urges Fiji to protect people, not fuel prices

As fuel prices continue to rise, the World Bank is urging Pacific governments, including Fiji, to protect vulnerable families through targeted social support instead of costly fuel subsidies.

Speaking at the launch of the Pacific Economic Update at the World Bank Group Office in Suva yesterday, Lead Economist for the Pacific Ralph Van Doorn said broad fuel subsidies placed heavy pressure on government finances and were not the best long-term solution.

“Targeted support – where we protect people, we don't protect prices,” Senior Economist Ekaterine Vashakmadze said.

She said allowing fuel prices to reflect real market costs encouraged households and businesses to reduce consumption and invest in alternative energy sources, while broad subsidies weakened that incentive.

Mr Van Doorn said Fiji was in a stronger position than many Pacific neighbours because about half of its electricity generation came from renewable energy sources.

He said Fiji and Samoa were currently the only Pacific countries generating around 50 per cent of electricity from renewables, while many other island nations remained heavily dependent on diesel for up to 90 per cent of their power supply.

However, he warned Fiji’s role as a regional fuel shipment hub for countries including Tonga, Samoa and the Cook Islands also made it vulnerable to global supply disruptions.

Mr Van Doorn said Fiji’s relatively developed social protection system provided Government with better tools to support struggling households compared with some other Pacific nations.

He said governments with stronger social support systems were already adjusting fuel prices while directing assistance towards those most affected by rising living costs.

The World Bank said any relief measures should remain temporary, carefully targeted and designed to avoid putting further pressure on already limited government finances.