RBF maintains Overnight Policy Rate at 0.25 per cent

The Reserve Bank of Fiji will maintain the Overnight Policy Rate at 0.25 per cent. This was confirmed in a statement from the Governor of the Reserve Bank of Fiji, Ariff Ali this week.

This was after it was reduced from 0.5 per cent in March.

Mr Ali said that the COVID-19 pandemic continues to negatively impact the global and domestic economy.

“More recently, countries have reported a flattening curve with regard to the outbreak and despite concerns of a second wave, have begun easing internal lockdown restrictions, sparking some optimism,” he said.

Mr Ali added that Fiji’s subdued economic outcomes o date are broadly consistent with global developments and the impacts of COVID-19 measures taken both globally and domestically.

“Travel restrictions have severely impacted tourism and related sectors, while suppressed global activity has resulted in weak demand for Fiji’s exports and reduced remittance receipts.” Economy Contraction

The Fijian economy is projected to note a severe contraction in 2020.

Mr Ali said that partial indicators to date reveal that the domestic economy will record the largest contraction, similar to a number of other countries.

He said some recovery is anticipated from 2021, however this is highly contingent on the resumption of global travel before year-end.

Mr Ali also noted that the Reserves Bank monetary policy objectives of stable inflation and adequate foreign reserves, these remain intact. Annual inflation has been in negative terrority since January and was -1.3 per cent in April underpinned by lower prices of yaqona, vegetables, kerosene and diesel.

“By year-end, inflation is forecasted to be one per cent, mainly due to expected increases in food prices and some stabilisation of global fuel imports.”

Foreign Reserves

RBF has indicated currently foreign reserves stands at $2.2 billion, sufficient to cover 6.9 months retained imports.

They have also indicated that foreign reserves levels are projected to remain sufficient, supported by a fall in imports and payments due to both low domestic demand and commodity prices and higher offshore government borrowings, which will more than offset weakened export receipts.