THE long-run decline in sugar exports is expected to accelerate this year with the elimination of production quotas within the EU market this September.
In its East Asia and Pacific Economic Update released this month, the World Bank said it was widely expected to reduce both the prices and the quantity of sugar imported in the EU market, accelerating the ongoing exit of farmers from the sugar sector. The report said external financing would remain a risk, but continued support from the donors, including the EU and multilateral lenders,would be forthcoming.

According to the World Bank, the external deficit will likely remain elevated from higher import demand for raw materials and capital equipment for reconstruction and infrastructure projects. In its report the World Bank said the fiscal deficit would likely remain elevated throughout the forecasting period, as the government accelerated the reconstruction effort while continuing to focus on spending on priority sectors — health, education, and infrastructure, the central elements of the previous two budgets — until the next election next year.

“The recently announced review of public sector wages, if it leads to large increases in the wage bill, will further challenge the path for fiscal consolidation,” it said. Meanwhile,the report highlighted that the external deficit for Fiji’s economy remained elevated at about 6 per cent of the gross domestic product (GDP), reflecting large structural deficits in the merchandise trade account.
“A large surplus in the services account (relating to tourism and transport) and continued strength in remittances, which rose by 10.2 per cent in the year to January, are providing needed offsets. “Foreign reserves remain adequate at $1976 million at end-February;sufficient to cover 5.3 months of imports of goods and services.”
It said the planned fiscal deficit for FY2016/17, announced in August, had widened to 7.3 per cent (4.7 per cent in the national convention of including privatisation receipt as revenue) from 3.5 per cent (1.5 per cent) from the previous comparable year, about 2.1 percentage points of which reflected cyclone-related spending. The World Bank forecast said the actual ratio of fiscal deficit to GDP was likely to be contained despite slower-than-expected growth in the first four months of the fiscal year,because of the under-execution of reconstruction spending.

Meanwhile, despite higher inflation, the Fiji dollar remained largely stable against the basket of currencies, and regained some ground against the US dollar and the euro in the year to January — 4 and 7 per cent, respectively — while depreciating against the New Zealand dollar, the Australian dollar, and the Japanese yen — -7, -2, and -0.1 per cent, respectively. (The Fiji Times Online)