IMF says Fiji needs to come up with sound policies

The latest International Monetary Fund Staff Report on Fiji states that there are considerable risks to macro-economic and external stability if sound policies are not pursued.

The report said a downside scenario would see a continuation of sluggish GDP and export growth and a depletion of reserves, with heightened risks in 2011 when the 150 million US dollars sovereign bond falls due.

The IMF Staff report states that the main downside risks are increased liquidity may translate into higher inflation, slow progress in reducing the budget deficit could threaten fiscal sustainability and structural reforms may be delayed further if the political complexities of civil service and land reforms are not resolved.

It further states that the Fiji economy is vulnerable to a variety of shocks, including a decline in external demand for tourism and exports, higher oil prices and natural disasters.

The IMF Staff Report on Fiji said the reliance on tourism as the main source of growth increases Fiji's vulnerability to shocks.

However the report said the authorities expect tourist arrivals to pick up with new airline routes and business confidence to recover with progress on structural reforms.

The IMF staff also commended the Fiji authorities for containing the overall deficit to about 3 percent of GDP in 2009 in the face of an unexpectedly sharp fall in revenue.

It said expenditure restraint limited the deficit to about the level projected in the November 2008 budget, even though the flooding in early 2009 hit revenues and increased the need for spending.

It said restraining expenditure was appropriate, though some spending cuts are not sustainable.
 
The Reserve Bank of Fiji yesterday announced the introduction of an Import Substitution Facility that will assist large scale commercial agricultural businesses to obtain credit at concessional rates of interest.

Governor of the Reserve Bank of Fiji, Sada Reddy said the new Facility is another one of RBF's initiatives to help Fiji's balance of payments.

He added that the Facility is expected to encourage domestic agricultural production and advance the competitiveness of local agricultural produce, resulting in a reduction in imports payments.

A total amount of $20 million is available through the scheme.

Eligible businesses may apply for concessional funding for the production after first satisfying to RBF that their business is import substitution related such as Fruit and Vegetables Root crops, Dairy produce and Beef.

However, businesses that produce items in which Fiji is already self-sufficient, such as pork, canned meat and chicken will not be able to access funds under the Facility.

The Facility is available for a maximum loan term of 5 years and is available through the commercial banks, licensed credit institutions and the Fiji Development Bank (FDB).

Meanwhile, Permanent Secretary for Agriculture, Colonel Mason Smith has welcomed the move by the Reserve Bank saying that this will certainly boost the morale of farmers, which will eventually have a positive effect on the economy.

Smith said they appreciate the show of confidence by the Reserve Bank of Fiji to reduce our imports and increase exports in the Agriculture sector, one of the mainstays of the economy.