Vybhavi Balasundharam, Ms. Leni Hunter, Iulai Lavea, and Mr. Paul G Seeds
Pacific island countries (PICs) rely on national airlines for connectivity, trade, and tourism. These airlines are being struck hard by COVID-19. Losses will weigh on public sector balance sheets and pose risks to economic recovery. With a backdrop of tight fiscal space and increasing government debt, losses in airlines are adding to fiscal risks in some PICs. This paper discusses tools to evaluate and manage the fiscal risks from national airlines in the Pacific. We present a snapshot of the current state of Public Financial Management (PFM) practices in PICs and detail the best practices. This exercise would illustrate the areas in which PICs have scope to improve their risk management with regard to national airlines. We then discuss the use of diagnostic tools and capacity development to enhance monitoring and risk management. Greater transparency and accountability in the airlines, combined with rigorous oversight, would be the first step towards improved financial management of national airlines.
Mr. Richard I Allen, Ms. Majdeline El Rayess, Laura Doherty, and Priya Goel
This paper reviews the Public Financial Management (PFM) reform stategy for 16 Pacific Island Countries (PICs) during the period 2010-2020. The strategy was endorsed by the finance and economic ministers of the region (FEMM) in 2010. The paper analyzes more than 30 PEFA assessments carried out across the region. The region shares the generally slow pace of PFM reform that is also a feature of most developing countries. Some PICs have improved their PFM performance significantly, while others have done less well. PFM reforms have suffered from the small size and low capacity of many PICs, poorly designed PFM roadmaps, variable political suppport for reform, and vulnerability to natural disasters. The paper recommends that in the next five years, there should be a more granular and targeted approch to PEFAs. PICs should focus on basic PFM reforms and (where capacities allow) more transparent public finances, as well as better management of climate change considerations, public infrastructure, gender inequalities, and state-owned enterprises. Perseverance by countries in implementing reforms and leadership by finance ministries are critical. PFTAC’s advice is highly regarded across the region, and it could consider alternative modalities of CD delivery and stronger coordination with other development partners.
Drawing on the Fund’s analytical and capacity development work, including Public Investment Management Assessments (PIMAs) carried out in more than 60 countries, the new book Well Spent: How Strong Infrastructure Governance Can End Waste in Public Investment will address how countries can attain quality infrastructure outcomes through better infrastructure governance—an issue becoming increasingly important in the context of the Great Lockdown and its economic consequences. It covers critical issues such as infrastructure investment and Sustainable Development Goals, controlling corruption, managing fiscal risks, integrating planning and budgeting, and identifying best practices in project appraisal and selection. It also covers emerging areas in infrastructure governance, such as maintaining and managing public infrastructure assets and building resilience against climate change.
Hidetaka Nishizawa, Mr. Scott Roger, and Huan Zhang
Pacific island countries (PICs) are vulnerable severe natural disasters, especially cyclones, inflicting large losses on their economies. In the aftermath of disasters, PIC governments face revenue losses and spending pressures to address post-disaster relief and recovery efforts. This paper estimates the effects of severe natural disasters on fiscal revenues and expenditure in PICs. These are combined with information on the frequency of large disasters to calculate the rate of budgetary savings needed to build appropriate fiscal buffers. Fiscal buffers provide self-insurance against natural disaster shocks and facilitate quick disbursement for recovery and relief efforts, and protection of spending on essential services and infrastructure. The estimates can provide a benchmark for policymakers, and should be adjusted to take into account other sources of financing, as well as budget risks from less severe as well as more frequent disasters.
This 2011 Article IV Consultation reports that Fiji’s economic outlook appears stable, but there are downside risks related to the political situation, structural weaknesses, and the global environment. The 2012 budget has proposed much-needed fiscal consolidation, though marginal income tax rate reductions will make it difficult to achieve deficit targets. Monetary policy is accommodative, given the currently benign inflation outlook, but continued vigilance against future inflationary pressure is critical, and credit growth targets should be avoided.
This 2009 Article IV Consultation highlights that Fiji’s growth has been sluggish in recent years because of delays in economic reforms, worsening terms of trade, and political developments that have strained Fiji’s international relations and hurt business confidence. Fiji’s economy is expected to have contracted by 2½ percent in 2009, reflecting the adverse impact of the global crisis on exports and tourism. Recent developments have put considerable pressure on the budget. Executive Directors have supported a tight monetary policy to ensure that inflation returns to low levels and to protect foreign exchange reserves.
The Pacific island region has considerable potential for development, especially in the areas of tourism, fisheries, forestry, mining, and agriculture. However, these countries face many challenges to developing their economies and raising living standards, including their small size, distance from major markets, and vulnerability to natural disasters. The first half of this book provides an assessment of regional issues. The second half includes country-specific chapters, which provide an overview of each countries economic performance since independence and the main challenges ahead.
This report presents the analysis, findings, conclusions and recommendations of the evaluation of the Pacific Financial Technical Assistance Center (PFTAC) that was undertaken between April 26 and May 14, 2004.
This report provides an assessment of fiscal transparency practices in Fiji against the requirements of the IMF Code of Good Practices on Fiscal Transparency. The assessment has two parts. The first part is a description of practice, prepared by the IMF staff on the basis of discussions with the authorities and their responses to the fiscal transparency questionnaire, and drawing on other available information. The second part is an IMF staff commentary on fiscal transparency in Fiji.
This paper reviews economic developments in Fiji during 1990–95. The reorientation of policies, although incomplete, led to stronger growth of nontraditional exports and non-sugar manufacturing, and to a pickup in GDP growth to an average of 4.1 percent between 1988 and 1993. Fiscal deficits declined in the early 1990s, although often larger than budgeted, and the external current account progressively turned into a surplus position. Despite the actions undertaken, however, private investment did not recover from its slump in the late 1980s impeding the economy from fully exploiting its growth potential.