Financial conditions accomodative with $1.6b liquidity
THE Reserve Bank of Fiji says financial conditions remained accommodative in light of ample liquidity which stood at $1.6 billion as at 30 September and relatively lower interest rates.
However according to the RBF economic review for the month of September, persistent credit risks continued to hamper credit activity.
“Private sector credit contracted in August (-2.0 per cent) with lower lending noted for both private individuals and private sector business entities,” stated the bank.
“In line with this, new lending by both commercial banks (-3.1 per cent) and credit institutions (-38.8 per cent) declined in the same period.
“The financial system continues to be challenged by increased credit risk, particularly from growing non-performing loans.”
RBF stated this was assessed to be manageable at this stage given adequate capitalisation and provisioning.
It stated liquidity in the banking system would continue to be supported by quantitative easing measures by the
RBF, including through the Disaster Rehabilitation and Containment Facility.
Accordingly, banks’ interest rates generally fell in August except for the new lending rate.
“Over the month in August, the Fijian dollar (FJD) strengthened against the Australian dollar (AUD) (0.9per cent) and the Euro (0.3 per cent) but weakened against the United States dollar (USD) (-0.5 per cent), the New Zealand dollar (NZD) (-0.4per cent) and the Japanese Yen (JPY) (-0.1 per cent).
“On an annual basis, the FJD gained against the JPY (4.6per cent), AUD (1.3per cent), Euro (1.3per cent) and USD (0.4per cent) but was lower against the NZD (-3.5per cent).
“Consequently, the nominal effective exchange rate (NEER)3 was lower over the month (-0.1per cent) but higher over the year (0.3 per cent).
“The real effective exchange rate (REER)4 was higher over the month (1.4 per cent) but fell (-1.8 per cent) over the year, denoting a gain in competitiveness on account of lower domestic prices relative to prices in major trading partners,” it stated.