Forget about devaluation of the Fijian dollar during crisis
Signs of economic recovery and a $2 billion reserve, rule out the possible devaluation of the Fijian dollar.
As long as this trend continues, although slow, there would be no devaluation in the current COVID-19 crisis.
Some argue that devaluation can boost export earnings, reduce trade deficits and cut interest payments on government debt.
As a result the Reserve Bank of Fiji can cut interest rates. Devaluation can reduce the cost of holidaying in Fiji and become a major boost to tourism. But the counter argument is that the devaluation will cause inflation.
Imported goods will cost more and travelling overseas will be more expensive. Devaluation will weaken the people’s purchasing power. It would scare investors and lower value of real wages.
While it has been forecasted that the contraction of the economy will reduce from 21 per cent to 19 per cent there is optimism that it could even reach 18 per cent this year.
The recovery, though slow and small, helps keep the economy afloat and ready to cope with a sudden surge in business and trade when the border reopens.
The Government no doubt is already working on incentives and smart schemes to take advantage of the increase in passenger and business traffic to Fiji and from Fiji to overseas countries.
Our resilience in the current
COVID-19 crisis and the aftermath of Cyclone Yasa is having a huge impact on our recovery. We appear to be doing better despite the latest World Bank report on the situation in the region.
It says fewer local jobs and sluggishness in new international opportunities are all taking their toll on labour markets in the seven Pacific countries examined in the report (Fiji, Kiribati, PNG, Samoa, Solomon Islands, Tonga and Vanuatu). Of these, countries that are more reliant on international tourism such as Fiji, Vanuatu and Samoa have borne the brunt of these effects, with tourism-related employment dropping by an estimated 64 per cent in Vanuatu and unemployment claims in June 2020 nearly tripling the 2019 total in Fiji.
Employment figures in countries where tourism plays a smaller role are also sobering, with job advertisements in PNG dropping by 76 per cent between February and May 2020 as a result of lockdowns and travel restrictions. Flow-on effects to other industries, including retail and food services, together with reductions in commodity prices and remittance inflows, have added to this significant economic hardship across the region.