SUMMARY OF FINDINGS 

PFM strengths and weaknesses 

Pillar One (outturns of expenditures and revenues) highlights good performance, with progressive improvements over the past three fiscal years, and significant improvement over the previous assessment (as discussed below)—PI -1, PI-2, PI-3 scoring B. B+, B respectively. Underpinning this is the quality and reliability of revenue projections, with aggregate revenue outturn achieving up to 98.5% of budgeted revenue. However, the composition outturn by revenue type reflects increasing variances over the last three years, although this was largely driven by fluctuations in direct and indirect taxes, and grants-in-aid (which are outside the control of government). The gap between planned and actual spending has narrowed over the past three years. Similarly, variances in administrative classifications have steadily declined, indicating better alignment between budget plans and actual expenditures by agencies. However, variances by economic classifications have slightly increased since FY 2021-22, highlighting ongoing challenges in achieving balanced execution across expenditure categories. 

In-year budget amendments represented less than 2.7% of total budget expenditures in 2023-24 (PI21.4). Consistent underspending in aggregate expenditure over the medium to long term poses significant risks to fiscal discipline and undermines the credibility of budget planning. It weakens the effectiveness of public service delivery and potentially leaves planned programs and initiatives underfunded. In this regard, budget reliability is undermined by shortcomings in medium-term budget (PI-16) discussed further below.

Pillar Two, Transparency of Public Finances reflects mixed performance across indicators. The chart of accounts (CoA) PI-4 reflects some good elements, vis-à-vis administrative and economic classifications. However, the absence of a functional classification2 aligned to the Classification of Functions of Government (COFOG) framework limits the ability to analyze expenditures from a functional perspective—hence this Indicator was assessed as a B. Budget documentation, PI-5, is comprehensive, ensuring Parliament is appropriately informed. PI-6 highlights comprehensive reporting of Central Government (CG) revenues and expenditures. However, this is undermined by tardiness in publishing audited financial statements of extrabudgetary units (EBUs). Intergovernmental transfers, PI-7, show strong adherence to rules-based systems, ensuring horizontal allocations are determined transparently. However, the ability to plan local budgets effectively is impacted by late notification of transfers limiting time for local governments to plan. Information on performance planning and reporting is significantly lacking, resulting in a score of D under PI-8. Ministries prepare operational plans (PI-8) which are costed and set out planned performance, with objectives and Key Performance Indicators (KPI). Information on actual performance is included in ministry/agency annual reports. Information is also provided on resources allocated to front line services. However, the plans are not published, FY2023-24 annual reports are delayed, and no independent evaluations of performance have been undertaken, resulting in a score of D+.

 Public access to fiscal information is generally good with four of the basic elements made public within the recommended timeframe, hence a score of B. A citizen’s guide to the budget is prepared which improves access and transparency. However, the 2022-23 annual financial statements have still to be audited and published, impacting overall transparency. 

Pillar Three – Management of Assets and Liabilities was a bit of a mixed bag. PI-13, Debt Management scored A, with the recent introduction of a Medium-Term Debt Management Strategy (MTDMS). PI-10, Fiscal Risk scored a C+. The inclusion of fiscal risk assessments in the Budget Supplement, along with the application of the IMF’s Fiscal Risk Analysis Tool (FRAT), reflects a structured approach to identifying macroeconomic and environmental risks at a national level. Information on contingent liabilities is well covered, including an estimate of some implicit contingent liabilities. However, overall performance on this indicator is undermined by delays in submitting audited financial statements from local governments. PI-12 public asset management scored B overall, but limitations were noted on nonfinancial assets data in the absence of a comprehensive overall central government asset database. PI11, Public Investment Management, scored C+, with economic analysis, project costing, and project monitoring remaining at C as per the previous assessment. However, improvement in PI-11.2, project selection, was recognized, scoring A, with project selection being prioritized based on published criteria and guidelines. 

Pillar Four reflects mixed performance across Indicators. Fiji has a well-developed budget framework premised on sound forecasts and solid analytical underpinnings. The Financial Management Act 2004 provides the legislative framework to advance the reform agenda. It mandates that budget estimates, the fiscal strategy, the Medium-Term Fiscal Framework (MTFF), and supplementary documents are provided to Parliament on a timely basis for review. PI-18, Legislative Scrutiny of Budgets, scored A: all budget documents are submitted for Parliament’s review; Standing Orders provide clear procedures and guidance; budgets have been submitted on time over the past three fiscal years, enabling approval prior to commencement of the new financial year; The Financial Management Act (FMA) 2004 provides guidance on budget amendments, which is adhered to. PI-14 Macro Fiscal forecasting was assessed C+), whilst macroeconomic forecasts lack interest and exchange rate analysis. The improvement in Budget Reliability (Pillar One) is somewhat attributable to performance under PI-14. 

Significant improvement has been realized under Fiscal Strategy, PI-15, with a score of A for each dimension, with detailed analysis of fiscal impacts of new revenue and expenditure policies, and the implementation of quarterly fiscal performance reports. PI-16, Medium Term Perspective in Expenditure Budgeting scored D+, the same as the 2019 PEFA, highlighting scope for further improvement. PI-17 regressed from pervious assessment scoring C, due to lack of budget ceilings in call circulars and limited time given in budget calendar and for legislative scrutiny.

Budget Execution and Control (Pillar Five) reflects good overall performance on most Indicators and dimensions, with the exception of PI-24 Procurement. FRCS is the main revenue collection agency, accounting for more than 89 % of all revenue collections. FRCS uses the SAP enterprise resource planning (ERP) package, which provides robust system support to managing assessments, collections, deposits into Treasury Bank Accounts, and tax debtors/arrears. Extensive guidance is provided to taxpayers, tax compliance measures are robust with an effective compliance improvement strategy (CIS). Revenue collections are recorded in the FMIS daily. PI-19 and PI-20 scored B+ and A accordingly. PIs21.2, 21.3 and 21.4 each scored A, with cash flow forecasts updated monthly; warrants released on a full annual basis; and budget adjustments were small, but transparent and in accordance with the legal provisions under the FMA. 

Under PI-21, In Year Resource Allocation, MoF prepares annual cash plans which are updated monthly; commitment releases are made at the start of the financial year for the whole year; and in year budget adjustments are small (2.7% of the budget) and are undertaken transparently in accordance with the FMA, as described in PI-18.4. However, banking arrangements are not well consolidated with many (36) bank accounts in existence and no automated sweeping or general fungibility between accounts. These accounts are also held across multiple (6) different banks. PI-21.2 was rated D accordingly, whilst other dimensions scored A. Accounts payable are well managed through the FMIS, with the stock of arrears being low and the FMIS providing detailed analysis of payables and arrears PI-22 scored A accordingly. Internal controls are robust for both payroll and non-payroll expenses (PI-23 and PI-25), scoring B+ and A respectively, facilitated by strong automated system controls in the FMIS. Procurement (PI-24) was highlighted as a specific area of weakness, scoring D overall. This was largely due to lack of procurement data from EBUs who are responsible for significant procurement activity, and FPO data was also lacking comprehensiveness. Internal Audit (PI-26) generally performed well, with good coverage of entities, and use of international standards and a risk-based approach. Generally, there is good follow up on audit findings. However, implementation of audit plans (PI-26.3) fared less well, scoring only D. Performance under Pillar Six was good with a score of B+ for Indicators PI-27 and PI-29. Although PI28.1 scored A, and PI-28.3 scored B, the overall score for the indicator was D+, on account of timeliness of in-year reporting, whereby although reports were mostly submitted within 2 weeks on some occasions, reports were submitted after 3 months (and the PEFA scoring is based on biggest time lag). Data integrity under PI-27.1 suffered from a lack of evidence on bank reconciliation by Statutory Authorities. i.e., EBUs. PI-29 highlighted significant improvement in timing of submission of annual financial statements (AFS) for audit. Coverage and data quality of in-year and annual financial reports was also very good.

Impact of PFM performance on three main fiscal and budgetary outcomes 

1. Aggregate fiscal discipline 

The COVID pandemic severely impacted the Fijian economy in early 2020. The Fijian economy is heavily dependent on the tourism sector which was severely and negatively impacted when international travel was interrupted globally, and borders were locked down. The downturn in the economy saw Government revenues fall steeply in FY2020-21 and FY2021-22. The Government undertook stringent measures to mitigate the impact on citizens and businesses, which resulted in significant increases in the budget deficit and to public debt, which reached 90.6% of GDP, in FY2021-22. 

Since then, Government has sought to consolidate and reduce deficits and debt. Deficits have progressively reduced, culminating in a primary surplus in FY2023-24. Revenues increased from 19.4% of GDP in FY2021-22 to 26.6% in FY2023-24. Debt has been progressively reduced year on year from 90.6% to 78.3% of GDP. 

Aggregate fiscal discipline has been made possible by sound fiscal strategies (See PI-15), underpinned by robust macrofiscal analysis and forecasting (See PI-14) and reliable revenue projections (See PI-3). Targeted spending plans, prioritizing social protection and public investment, facilitated control over aggregate spending (See PI-1) which saw total expenditures fall from 33.9% of GDP in FY2021-22 to 31.5% in FY2023-24

Adherence to the FMA which prescribes robust procedures for budget adjustments ensured that these adjustments were small, i.e., only 2.7% of the original budget in FY2023-24 (See PI-21.4). Fiscal discipline was also facilitated by a strong internal control environment, as evidenced under PI-22, PI-23, PI-25.

2. Strategic allocation of resources 

Fiji has a well-developed budget planning framework predicated on a Medium-Term Fiscal Framework. Budget planning and preparation aims to align individual ministry budget submissions with the National Development Plan (NDP) objectives and Vision 2050 (See PI-16). The Financial Management (Amendment) Act 2021 requires the Ministry of Finance to prepare detailed fiscal strategies, which are closely aligned with revenue, expenditure priorities, and debt management. However, the estimates for the two outer years are presented as “proposed changes” which are assumed zero for most of the programs. This implies the FY2024-25 expenditure levels remain largely unchanged in the two outer years.

 Under the framework, Ministries are required to prepare costed operational plans detailing strategic goals, activities, outputs, and performance indicators. However, there seems to be lack of a consistency in format of the plans across ministries, and alignment between program objectives and performance outcomes and specific budget allocations is not always clear.

 Information on actual performance is required to be included in ministry/agency annual reports, In practice, the most recent published annual report of any of the seven largest ministries dates back to 2021-22.

 In addition, there is no formal system of regular program evaluation. While the Office of the Auditor General has conducted some limited performance audits, these have covered only a small fraction of service delivery expenditure. The absence of comprehensive, independent evaluations limits the government's ability to assess the impact and effectiveness of its programs as well as to make informed adjustments to its budget allocations and program design.

3. Efficient use of resources for service delivery 

Despite consistent underspending relative to approved budgets, recent progress in narrowing the gap between planned and actual expenditures indicates improved alignment in fiscal management. Reduced variances in administrative classifications reflect better agency-level adherence to budget plans, enhancing resource predictability. However, persistent underspending, coupled with increased variances in economic classifications, undermines budget credibility and impairs the full implementation of planned programs. This, in turn, weakens service delivery and erodes public trust in government spending priorities. 

Challenges in procurement practices and limited follow-through on internal audit recommendations further hinder efficiency. Procurement inefficiencies, especially in decentralized entities, compromise cost-effectiveness, transparency, and timely program execution. While internal audits generally perform well, the low implementation rate of their recommendations limits their impact on addressing inefficiencies and strengthening governance. Addressing these gaps, alongside leveraging fiscal performance reports to inform future planning, will be critical to enhancing the effectiveness of public service delivery. 

Strong cash flow forecasting and the release of full annual appropriations (PI-21) provide spending ministries with resource predictability, supporting effective budget execution. The internal control framework is robust, as demonstrated by high scores in key areas: PI-22 (A) for low expenditure arrears due to effective payment processes; PI-23 and PI-25 (B+ and A) for strong budgetary controls; and PI26 (with two A scores and one B) for internal audit performance.

Performance change since previous assessment 

The 2024 PEFA assessment reflects significant improvements over the 2019 PEFA. Figure 2.2 below shows an increase in A scores from 3 to 5, B+ scores from 6 to 10 and B scores remained at 6 across all indicators. 

Figures 2.3 shows a side-by-side comparison for each indicator between the two assessments. The improved performance can be clearly seen. Annex 6 compares the respective scores for the two assessments by dimension with a brief explanation of the changes

2.4 Progress in Government PFM reform program

Following the 2019 PEFA, the MoF developed the Public Financial Management Improvement Plan 2020-2025 plan (PFMIP). MoF has been successful in implementing a number of reform initiatives under the PFMIP which have reflected in improved ratings in this assessment compared to the 2019 PEFA assessment. The MoF has been working on strengthening the medium-term fiscal framework to align the revenue targets with the fiscal strategy. Efforts to further improve forecasting methodologies of individual revenue items are also ongoing, in consultation with the Revenue Technical Committee comprising MoF, FRCS and the Reserve Bank of Fiji (RBF).

The government has formulated a Medium-Term Fiscal Strategy (MTFS) covering the period FY2024- 2025 to FY2026-2027, which includes an MTFF with measurable objectives and targets to guide budget preparation, alongside broad guidelines for expenditure and revenue policy formulation and debt management. PFMIP plans include the implementation of a medium-term expenditure framework (MTEF) aimed at integrating the budget and planning processes with broader fiscal policy goals to enable more effective and efficient resource management. The plan envisages drafting guidelines on medium-term expenditure planning, preparing a training manual, and strengthening the technical and institutional capacity of Budget Division staff. However, progress on an MTEF is yet to commence, and the plan indicates the need for technical assistance to support this. 

A new FMIS has been implemented for FY 2024-25, which also includes the implementation of a new Budget Classification Structure (BCS) and CoA, aimed at standardizing the classification of government budgeting and accounting data, and aligning to international standards, i.e., Government Finance Statistics (GFS) and COFOG. The new CoA will also allow for gender and climate tagging. The FMIS covers all the core financial functionality, including purchasing management, Accounts Payable (AP - including payments management), Accounts Receivable (AR - including receipts management), General Ledger (GL), assets management, bank reconciliation and reporting. Implementation also included the payroll system, integrated with the FMIS payments functionality. The Human Resources (HR) module is yet to be implemented but will strengthen internal control on payroll expenses with integration the HR and payroll modules.

A new budget planning software, (Questica), is currently being implemented and is expected to be piloted for FY2025-26. This will strengthen the budgeting process and provide better integration with the FMIS. The PFMIP also prioritizes reporting on the performance of service delivery programs. Monitoring and reporting will be strengthened through an improved budget submission template, incorporating gender-responsive budgeting. MoF also seeks to strengthen climate responsiveness in budget policies with the initiation of Green PFM initiatives.

Recent reforms have included the preparation of a MTDS and the transition from the CS-DRMS to the CS-Meridian debt management system. All ministries have recently formulated asset management strategies, and the next step will be to establish a National Asset Register, which will be integrated with the new FMIS system to strengthen asset tracking and management across the government. Asset registers will ultimately incorporate climate dimension data, such as locations and climate vulnerability.

 Guidelines for the Preparation, Appraisal and Approval of Projects under the Public Sector Investment Program (PSIP) have been approved, and a pilot comprising ten ministries/entities has been implemented in FY2024-2025. Oversight of Public Investment Management is being strengthened through improved project monitoring and transparency. Quarterly and annual project reporting will become a mandatory requirement for entities implementing projects, with updates managed through the project management database system (PMWEB). 

Significant reforms have been made in strengthening Internal Audit, including implementing modern risk-based audit practices; International Internal Audit Standards; Development of Internal Audit Charters; and approving a Quality Assurance Improvement Plan (QAIP). 

The legal framework was updated (revised budget amendment April 2022). Procurement Regulations were updated in 2020, and guidelines have been developed but these are not due to be implemented until March 2025.