Fiji ratings weighed down by political uncertainty

Fiji ratings weighed down by political uncertainty - Moody's

	Published : Wed, 29 Aug 2007 07:29 By : Agencies Print this Story

MUMBAI (Thomson Financial) - Moody's Investors Service said its 'Ba2' government bond rating and negative outlook on the Fiji Islands are supported by the low external debt and debt service burden of the government and the private sector, but are weighed down by political uncertainty and other credit vulnerabilities.

In its annual report on the country, the agency added that Fiji's vulnerabilities also include its relatively high domestic government debt and the uncertain prospects of the important sugar and garment industries. Ethnic and political divisions have also affected the investment climate as well as fiscal management.

'While the country's tourism industry has relatively good long-term prospects, political instability following December's military coup has negatively affected investment levels, economic growth, and the health of the government finances,' said Moody's vice president Steven Hess, author of the report.

A milder downturn in tourism arrivals is expected this year compared to the fallout from the coup in 2000, after which arrivals did not recover to their 1999 level until 2003. In contrast to 2000, the December coup was not violent. Moreover, the interim government announced its intention to maintain the previous government's plan to reduce the deficit to 2.0 pct of GDP instead of doubling spending, as occurred in the wake of the earlier overthrow.

The interim government has produced a 'roadmap' for a return to democracy by 2010, which requires completing a national census and redrawing electoral boundaries before holding elections.

'However, the roadmap was not well received internationally, with several foreign governments -- including Australia, New Zealand, and the European Union -- calling for elections to be held within two years,' said Hess.

'While a formal response has not been made, the Fiji government seems prepared to advance its schedule,' he added.

TFN.newsdesk@thomson.com

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Fiji ratings weighed down by political uncertainty - Moody's