In June, Finance Minister Biman Prasad tabled Fiji’s 2025–26 National Budget. The budget marks a strategic pivot for Fiji. With inflation falling, debt stabilizing, and fiscal space restored, the government is choosing to spend—and to do so deliberately.

The result is an expansionary budget—but not one driven by desperation. Instead, one that reflects a shift in strategy. And the strategy is simple, consolidate first, then expand. That’s a rare fiscal strategy in our region, where countries are often forced to do the opposite.

Now, to put this in perspective, Fiji’s post-COVID recovery has been impressive. Real GDP grew by 7.5% in 2023 and 4.0% in 2024. The Ministry of Finance projects 3.2% growth in 2025—slightly down from 3.4% earlier, largely due to external risks. Still, the domestic fundamentals remain sound. Inflation has eased sharply—from 5.1% in 2023 to just 1.3% in 2024 and 0.1% by May 2025. Foreign reserves are strong at $3.7 billion. And the banking system is flush with liquidity, oiling steady credit flows and low interest rates.

The Fijian government used this recovery phase to rebuild its credibility. Public debt has fallen from over 90% of GDP in 2022 to 79.8% this year. While still elevated, the trajectory is positive. Further, a combination of tax reforms and tighter spending controls helped stabilise their books. That consolidation created the room to spend.

The 2025–26 budget projects total revenue of $3.9 billion and spending of $4.8 billion. That results in a deficit of $886 million (6.0% of GDP)—double the average of the past two years. This is not like testing waters; it marks a conscious policy shift towards stimulus.

The budget documents showed a government with a clear focus on shielding households and investing in long-term capacity. For the households, several headline measures were taken. First is the VAT relief. VAT rate drops from 15% to 12.5% from 1 August, which would see $250 million in tax relief. Combined with continued zero-rating of 22 essential items, total relief is estimated at $500 million. Second, is social protection. A 5% increase in welfare payments and pensions, building on the 15% increase last year. Third is the increased public sector pay. Civil servants receive another 3% raise after a 7–20% increase in 2024—bringing total pay raises to between 10% and 23% just under a year.

Fourth is transport support. A new 10% bus fare subsidy for all citizens, plus continued subsidised and free transport for students. And fifth and final investment is the back-to-school grant. The $200 education grant is extended to reach over 210,000 students. In total, the government estimates its cost-of-living relief package at over $800 million—equivalent to 5.4% of GDP.

Beyond short-term relief, the budget also leans heavily into long-term development. The education sector receives $847 million, including $153 million for tertiary scholarships. Over 24,000 students will receive full scholarships, with expanded allowances and special support for students from rural areas and those with disabilities. Vocational training is also being scaled up through expanded TVET and micro-qualification programs.

The health sector is allocated over $600 million. The centrepiece in this sector is a new national hospital—costed at $2 billion which construction is set to begin soon. Dialysis expansion, rural clinics, and private sector partnerships also feature prominently in the health sector budget. Water infrastructure sees $284 million allocated to the Water Authority of Fiji, with major upgrades underway in Suva, Nadi, and Labasa. New treatment plants, pipeline extensions, and leakage-reduction programs aim to reduce “non-revenue water” (currently ~50%) to 20% over the next five years.

Transport spending is also rising. The Fiji Roads Authority receives $388 million—$37 million more than last year—for road maintenance, rural access, and bridge works. The broader infrastructure pipeline includes 177 active projects valued at around $5.8 billion.

To support the real economy, the government is taking steps to contain inflationary pressures. Import duties on selected goods have been reduced. An enforcement taskforce is now monitoring compliance to ensure that VAT and tariff reductions are passed through to consumers. Price gouging will not be tolerated, as penalties and price controls are on the table if needed.

However, running a 6% deficit is not without risk. Fiji’s economy remains exposed to external shocks—from natural disasters to human disasters such as war. But clearly, this budget doesn’t reflect fiscal recklessness. The government argues that it is spending not out of necessity, but out of opportunity.

And there’s evidence to support that view. This is not a return to the pre-COVID model of high deficits and weak controls. The fiscal stance is becoming transparent. The priorities are clear. Their strategy—reform first, expand later—is coherent.

What matters now is implementation. Delivering large-scale infrastructure and social programs will test the institutional capacity of Fiji. But macro indicators are moving in the right direction: debt is falling, inflation is low, and policy appears more rules-based than reactive.

One can say that Fiji’s 2025–26 budget offers valuable lessons for other Melanesian economies. It shows that good policy sequencing matters: governments must build fiscal buffers before deploying them. It also shows that fiscal expansion can be both pro-growth and pro-poor—if well targeted and transparently managed. With global turbulence rising, such a strategy as Fiji’s stands out for its calmness. It signals confidence, not crisis. There is more spending, yes—but also more scrutiny, more direction, and more focus on long-term resilience.

In a way, Fiji is spending with purpose, not pressure—a conscious shift towards stimulus.

All data are sourced from here.