Foreign Reserves Sufficient for 6 Months
BUT RBF WARNS OF STEEPER ECONOMIC CONTRACTION THAN EARLIER PREDICTED
FREDERICA ELBOURNE
The Reserve Bank of Fiji says foreign reserves are sufficient to retain imports for the next six months.
In its April economic review, RBF said foreign reserves were $2.2 billion and enough to sustain imports for the next 6.9 months. The report compares performance for the corresponding period last year.
RBF Governor Ariff Ali said an additional $100 million will be injected to the import substitution and export finance facility to help the private sector.
The injection should serve as some respite in the face of difficulties caused by coronavirus (COVID-19).
Fiji Export Council chairman Mike Towler said while the injection was a great idea, applications processed via commercial banks and their requirements in the current business environment were onerous with high interest rates.
“The RBF should take the applications away from the commercial banks and give them to the Fiji Development Bank or some other institution that doesn’t want to put the bar too high and beyond the reach of most applicants that would normally qualify in normal times.”
Mr Towler said commercial banks in Fiji were the biggest impediment to businesses recovering from COVID-19.
“It is time for the Fijian Government to put some pressure on commercial banks to play their part in a recovery.”
Bounce back
Meanwhile, Mr Ali warned of a steeper economic contraction to the earlier -4.3 per cent forecast. “The actual magnitude of the contraction will depend on the duration of the pandemic, how quickly global trade and tourism will resume, and the effectiveness of policy responses.”
The April report also highlighted a -19.2 per cent decline in Value Added Tax collections.
The Fijian dollar strengthened against the Australia and New Zealand currencies, Mr Ali said. Electricity production expanded, he said.
Recovery 2021
While the domestic economy is expected to pick up towards the end of 2020, economic recovery is projected for next year, he said. Mr Ali said remittances grew by a modest 5.9 per cent.
Domestic deflation persisted for the sixth consecutive month as prices fell by 2.8 per cent, he said. RBF noted lower prices for alcoholic beverages, tobacco and narcotics. Food, non-alcoholic beverages and the housing, water, electricity, gas other fuels categories more than offset the higher prices recorded in the transport category, Mr Ali said.
Commodity prices
By global standards, the downturn in economic activity will be the worst since the Great Depression in the 1930s, he said.
Mr Ali said commodity prices were largely influenced by pandemic fears.
While sugar prices dropped, the rush for safe-haven assets increased gold prices, Mr Ali said. Gold production however dropped, Mr Ali said.
The forecast for June 2020 is a lackluster output, he said.
Credit
As at April 29, the Fiji National Provident Fund received 65,800 applications for the coronavirus withdrawal scheme assistance. Mr Ali said excess liquidity in the banking system remained adequate at $590 million at the end of March.