THE International Monetary Fund has commended Fiji's effort to limit its overall deficit in 2009 to the budgeted level of 3.75 per cent of GDP.
IMF Fiji mission chief Ray Brooks said this was achieved by containing expenditure in the face of an unexpected 10 per cent fall in revenue.
"However, central government debt at over 50 per cent of GDP, is high by regional standards. In addition, government has contingent liabilities of around 15 per cent of GDP," Mr Brooks said.
The comments came after the IMF completed a two-week visit to Fiji, which included meeting with government officials and non-government organisations.
"Economic growth in Fiji has been sluggish in recent years due to political developments, delays in structural reforms and worsening terms of trade," he said.
"Job growth has been slow and unemployment rose to eight and a half per cent in 2008. The economy is expected to contract by two per cent in 2009 as the impact of the global crisis has been exacerbated by floods that damaged crops and tourist infrastructure early in the year.
"Gross Domestic Product growth of two per cent is likely in 2010, driven by the rebound in tourism, devaluation, global recovery and rebuilding after the floods.
"Growth over the medium term should rise to two and a half per cent with fiscal consolidation and progress on structural reforms."
Mr Brooks said Fiji faced considerable risks given how vulnerable it was to outside factors. "Increased liquidity in the banking system poses the risk of inflation, macro-economic instability, and loss of competitiveness.
"The growth outlook remains uncertain due to political developments, fragile nature of the global recovery, volatility of commodity prices, the risk of natural disasters and the complex structural reform agenda."
The visit was in accordance with Article IV of the IMF's Articles of Agreement