Fiscal Sustainability and Climate Resilience Development Policy Operations (DPO)

The operation supports Fiji’s reform effort to strengthen medium‐term fiscal sustainability while undertaking structural reforms to improve the business climate and resilience to climate change.

This Development Policy Operation (DPO) is intended to support the government in its implementation of reforms to safeguard medium-term fiscal sustainability while creating an environment for private-sector led growth and building climate resilience ... (i) strengthen medium‐term fiscal sustainability; (ii) improve the investment climate; and (iii) build climate resilience. Under the first pillar, the government is simplifying the tax system to encourage compliance and private‐sector‐led growth and strengthening the monitoring framework of fiscal risks associated with the country’s sizeable state‐owned enterprise (SOE) sector. Under the second pillar, the government is removing obstacles to Foreign Direct Investment (FDI) by updating the country’s arbitration law to recognize and enforce overseas arbitration awards and improving the business climate by reducing costs of dealing with construction permits. Under the third pillar, the government is strengthening climate resilience of all new buildings by adopting more stringent building standards.

Pillar I. Improving Fiscal Sustainability
The fiscal deficit is reduced.
Target (2019‐20): the actual fiscal deficit is less than 2.8 percent of GDP.
Target (2019‐20): Decisions to on‐lend and give guarantees are justified with explicit reference to the SOE’s credit risk, as evidenced by the Minister for Economy’s written approval in the case of on‐lending and by the minutes of the cabinet decision in the case of guarantees.
Pillar II. Improving Investment Climate
Greater compatibility of investment law in Fiji reduces real and perceived risk of investing in Fiji.
Target (2018‐20): The average number of EOIs received by Investment Fiji increases by more than 10 percent from the baseline.
Time and costs spent obtaining a construction permit and starting a business are reduced
Targets (2019‐20): The average time spent obtaining a construction permit and the average time and cost spent starting a business are reduced by 50 percent.
Pillar III. Building Climate Resilience
Improved building codes and standards are implemented and enforced.
Target (2019‐20): To be specified during the preparation of the second operation in the series.

1 Strengthening medium-term fiscal sustainability
Two of three targets were initially met, though the RIs were not rated as satisfactorily relevant to achievement of the objective and the impact was moderated through exemptions. The fiscal deficit target was not achieved.
2 Improving investment climate
One RI had no progress; two of four RI targets were fully achieved by closing, and one substantially achieved. None the four RIs was satisfactory as indicators of achievement of the objectives being sought through the PAs.
3 Building climate resilience
Among the five indicators for two PAs, one was substantially achieved and three made modest progress, which is ongoing and likely to continue. One RI was not achieved, but the associated action is no longer considered practical, and there was progress toward the actual objective.

Related to Fiji Second Fiscal Sustainability and Climate Resilience Development Policy Operations (DPOs) P168402