Excess liquidity in the banking system reached a historical high of $1.1 billion last month, driven by the increase in foreign reserves which in turn was underpinned by government external borrowing.
The Governor and Chairman of the Reserve Bank of Fiji Board, Ariff Ali says foreign reserves are adequate at $2.3 billion, sufficient to cover 8.5 months of retained imports of goods and services and anticipated to remain at comfortable levels in the medium term.
He says liquidity in the banking system is envisaged to remain ample in the foreseeable future and continues to place downward pressure on market interest rates, which generally fell in August.
However, domestic credit contracted last month, driven by the decline in lending to the private sector and this is a result of general tightening in lending standards amid the subdued economic environment.
Annual inflation slid further to -3.0 percent last month from -1.6 percent in July, primarily influenced by lower prices of alcoholic beverages, yaqona, food and fuel.
Meanwhile, the RBF recorded a net profit of $30.1 million for the 2019-2020 financial year, which was slightly higher than the $28.9 million recorded in the 2018-2019 financial year.
According to the RBF, a transfer of $31.8 million will be made to government, which accounts for $1.0 million transfer to the General Reserve Account and inclusive of $2.7 million being one-fifth of the Revaluation Reserve Account.
Ali says the profit was underpinned by a reduction in total operating costs which more-than-offset the lower interest income.
Ali says improvements to global economic activity is largely dependent on effective containment of the COVID-19.
He says domestically, border restrictions are continuing to restrain tourism, and yield uneven out-turns across industries.
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