Fiji dollar devalued by 20%

The Fiji dollar has been devalued by 20 percent with immediate effect.

The newly appointed Governor of the Reserve Bank Sada Reddy announced this earlier today.

The RBF said the devaluation will bring the Fiji dollar in line with the major trading partner countries such as Australia and New Zealand.

The bank said the Fiji dollar had appreciated significantly by around 20 percent since 2007 and 2008.

He said by correcting the value of the Fiji dollar, it is expected that our exporters will benefit and will provide much needed boost to tourism.

However, we will be paying more for our imports as the value of the Fiji dollar has been reduced by 20 percent.

The Reserve Bank said inflation is expected to rise immediately but will subside in the next 12 months.

For interest rates, the Lending rates will be regulated as follows:

- The weighted average lending rates of banks and other lending institutions including FNPF will be kept at the level as at 31st December, 2008. This adjustment must take place within three months.

- The interest rate spread of banks must be reduced to 4 percent or below by 31st December, 2009. This policy will be reviewed in 12 months time.

- Banks are directed to set up specialized micro-finance service centres in all their branches by January 2010. The Reserve Bank will support this set up by setting up a Micro-Finance Research and Development Unit headed by the Chief Manager.

The Reserve Bank is asking all sections of Fiji's community to bear the burden of adjustment so that our economy can recover quickly and start to generate much needed employment.

It said in this regard, the control on banks interest rates will assist the business sector to have a more stable interest rate environment and depositors will earn respectable interest rates.

The banks are requested to play an active role in the economic recovery.