In May this year, Fiji Airways, which is 51% owned by the government, announced that it had secured sovereign guarantees over $455m of new borrowings.

And according to Standard and Poor’s research on the Fijian government’s credit ratings on public debt, the Fijian government also provides guarantees over about $590m of loans to other state-owned enterprises as of July 2018.

The latest available data point, indicates that sovereign guarantees are now equivalent to around 9% of GDP.

According to the Standard and Poor’s Rating on Fiji’s Economic Outlook, gross external financing needs, by their measures, will rise to about 115% to 117% of current account receipts and usable reserves during the next few years.

The current account deficit had already been widening over the past two years, echoing the fiscal deficit, and according to Standard and Poor’s this is expected to remain elevated at around 12% to 13% of GDP this year and next.

Remittance inflows are likely to drop as Fijians abroad face tough labor markets, the external risks, though, are partly mitigated by the
structure of Fiji’s external balance sheet, with its relatively large share of inward foreign direct investment as well as good access to concessional finance from multilateral and bilateral official

The high import content of tourism exports should help to prevent a material weakening of the trade balance.

In addition, the report says mineral fuels make up about one-third of Fiji’s import bill, and so the country benefits from low global oil prices.

Fiji, the report went on to say has only a small amount of foreign-currency commercial debt outstanding, in the form of a US$200m bond due to mature in October 2020.

The government has already set aside at least US$100m in a sinking fund, and we believe that imminent commitments of at least US$100m more from multilateral lenders will allow Fiji to meet redemption without drawing down on its reserves.

To finance its deficits, Standards and Poor’s says government will need to target a domestic and foreign borrowing mix of roughly 70:30.

Fiji it says issues a range of bonds and bills in its domestic market, most of which are purchased by the FNPF with no no plans at this stage to issue new foreign-currency bonds.

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