Fiji’s Coalition Government has presented its largest budget to date — a $4.8 billion plan focused on easing the cost of living, strengthening public services, and responding to emerging social challenges, including drug abuse and the growing threat of HIV infections.
While the budget features sweeping relief measures and major investments in education, health, and infrastructure, it also comes with a significantly widened deficit and a forecasted decline in VAT collections — raising questions about how it will be financed.
Setting the Stage: A Look Back at 2024–2025
The 2025–2026 budget builds on stronger-than-expected fiscal performance in the current 2024–2025 financial year. The government now expects to close the year with a net deficit of $505.3 million or 3.6% of GDP — lower than the original estimate of $635.5 million (4.5% of GDP).
Total revenue is expected to reach $3.94 billion, an 8% increase from the previous year, driven by robust VAT collections and better-than-expected personal and corporate tax receipts. Tax revenue alone is projected at $3.42 billion, about 3.7% above target, thanks to strong domestic consumption.
Non-tax revenue fell short of expectations by 16.5%, largely due to weaker-than-forecast grants, dividend returns, and asset sales. Total expenditure has been revised down slightly to $4.44 billion, aided by underspending in capital projects.
Government debt is forecast to end the financial year at $10.8 billion (77.5% of GDP), with $7 billion in domestic debt (64.9%) and $3.8 billion (35.1%) externally sourced — both figures slightly better than anticipated.
This performance, supported by tighter spending controls and stronger revenue collection, has helped create the fiscal room for the increased commitments announced in the 2025–2026 budget.
Key Measures in the 2025–2026 Budget
Headlining the range of measures designed to ease cost-of-living pressures is the reduction in the Value Added Tax (VAT) from 15% to 12.5%, which takes effect on 1 August 2025.
Zero-rated VAT on 22 essential food and household items—like rice, flour, and cooking oil—will remain in place.
To further ease household costs, the government has announced significant duty reductions on commonly consumed items:
- Chicken portions: fiscal duty reduced from 32% to 15%
- Caster sugar: reduced from 32% to 5%
- Juice products (without added sugar): 15% import excise removed
- Frozen fish and salmon: fiscal duty slashed to zero
- Tomato sauce: duty halved, with import excise added
A set of VAT incentives is also included, such as refunds on solar installation costs and for rebuilding homes affected by termite infestations.
Revenue Projections and Compliance Measures
These tax relief measures are expected to reduce VAT collections by $177.6 million in the new financial year. Total tax revenue is forecast to fall slightly to $3.37 billion, a 1.4% drop from the revised 2024–2025 figure. As a result, Fiji’s tax-to-GDP ratio is expected to decline from 24.5% to 23.0%.
To boost revenue and promote compliance, the budget introduces several enforcement measures:
- Businesses with turnover above $50,000 must register for the VAT Monitoring System (VMS) by 1 January 2026
- Sole traders will be required to submit asset declarations alongside income tax returns, including movable and immovable assets, loans and all sources of income, effective from 1 January 2026 – all of which to curb tax evasion, and foster a culture of financial transparency.
- Mobile wallets (M-PAISA, MyCash) will now require TINs for registration, and deposits—including unexplained or unidentified income—will be treated as taxable. A six-month time-frame has been given for compliance.
- Separate e-wallet accounts will be required for businesses, with penalties for non-compliance
- A new 3% export duty will be introduced on gold and silver ores to encourage domestic value addition
Departure tax will increase from $170 to $200 in August 2025, expected to raise around $20 million in additional revenue. Other reforms include changes to customs concessions and a new VAT structure for online purchases and personal imports.
Non-Tax Revenue and Support from Development Partners
Non-tax revenue is projected to increase to $573.2 million, up 11.2% from the current year. This includes:
- $183.3 million from fees, fines, and charges
- $124.4 million in grants
- $159.1 million in dividends from State-Owned Enterprises and the Reserve Bank
- $30 million in recoveries from trust fund accounts
Together, tax and non-tax revenues bring total government income to an estimated $3.95 billion—or 26.9% of GDP.
Where the Money Will Go
The increased expenditure of $4.83 billion reflects expanded support for public service workers and vulnerable groups. The key allocations include:
- A 3% pay increase for civil servants (on top of previous adjustments of 7%–20%)
- A further 5% boost to social welfare payments and government pensions, following a 15% increase last year
- $220 million in social welfare support
- A 10% public bus fare subsidy to run from 1 August 2025 through July 2026
- Ongoing Back-to-School Assistance of $200 per student
Other notable expenditures include:
- $153 million for scholarships under the Fiji Scholarship Scheme
- $40 million for school transport assistance
- $9.5 million in electricity subsidies
- $4 million to reinstate FNPF pensions for those impacted by the 2012 reforms
- $6 million allocated to strengthen the national HIV response, including prevention, testing, and community outreach
Operating expenditure is budgeted at $3.91 billion, while capital investment will total $926.6 million, with some capital items now reclassified as operating costs, such as the Fiji Scholarship Scheme, Back to School Assistance, FNPF Pension Payout, Tourism Marketing Grant, and Vehicle Leasing among others, under a new accounting structure.
How Will the Budget Be Funded?
With a projected deficit of $886 million (6% of GDP), the government plans to fund the shortfall through a mix of domestic borrowing and concessional external loans from multilateral and bilateral partners. The total financing requirement, including principal repayments, amounts to $1.49 billion.
By July 2026, total public debt is expected to increase to $11.7 billion, or 79.8% of GDP. While debt remains high, the government argues that continued access to concessional finance and manageable debt servicing costs make the path sustainable in the medium term.
Finance Minister Professor Biman Prasad reassured on debt sustainability: “Our debt level is manageable given the growth projections and the fiscal discipline we have demonstrated,“ he said
Despite an expected drop in the government’s operating surplus to just $28 million (0.2% of GDP), down from $597.8 million this year, officials maintain that the approach is necessary to address immediate needs while keeping long-term development on track.
Looking Ahead
Professor Biman said the government’s ability to table such an expansive budget is the result of “bold decisions” made over the past two years.
“This higher deficit and Government expenditure to counter the impact of global headwinds is only possible because we took bold measures in the last two budgets to create fiscal space,” he said. “We kept our actual deficits at an average of around 3 per cent, lower than budgeted and much lower than under the previous regime.”
