The Governor of the Reserve Bank of Fiji and Chairman of the RBF Board, Ariff Ali says the recent measures announced in the revised 2021-2022 National Budget are expected to cushion some of the inflationary pressures and reduce inflation by around 0.9 percentage points.
Ali highlighted that annual inflation was at 1.9 percent in February 2022 led mainly by higher food and fuel prices.
Food prices have been impacted by the existing pandemic-induced bottlenecks, the recent events surrounding the Russia-Ukraine war, the effects of Tropical Cyclone Cody and the sugar price review in January.
The RBF Governor also says the geopolitical tensions between Russia and Ukraine is a major new source of uncertainty that has led to supply shortages and subsequent increases in the price of crude oil, food and other commodities.
Ali says this has added to the already elevated inflationary environment brought on earlier by the COVID-related supply chain disruptions and the mismatch between demand and supply.
Inflationary pressures have also posed challenges for central banks as they attempt to rein in inflation whilst managing growth.
The International Monetary Fund has advised that global growth in 2022 is likely to be lower than previously anticipated on account of these developments.
The RBF Governor says the current situation is fluid and the RBF is following events closely.
Regarding the pandemic, the Governor added that it is positive to see the number of coronavirus cases fall globally and the return to some form of normal life across the globe and Fiji as various COVID-19 related protocols are being gradually phased out.
On foreign reserves, Ali says while the import bill is expected to surge to meet the demand of the growing economy as well as higher commodity prices, the expected rebound in tourism earnings is anticipated to keep foreign reserves at adequate levels in the near term and are currently at $3.125 billion, sufficient to cover 8.6 months of retained imports of goods and services.
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