Monday, May 31, 2010

US$150m off-shore Debt Poses Risk to Fiji Economy

Fiji Broadcasting Corporation - Monday, May 31, 2010


Fiji will struggle to pay off a $US150m debt to be paid off next year to international investors if there continues to be sluggish GDP and poor export growth.



The International Monetary Fund, in its 2009 Article 4 Consultation Report, states that Fiji needs to carry out economic reforms in order to avoid negative economic repercussions.



Fiji’s $US150m off-shore debt was taken out in 2006 by the Laisenia Qarase Government, who floated the amount as government bonds.



The IMF says Fiji has to carry out economic reforms quickly or the continuation of a sluggish GDP and export growth will heighten risks next year.



The Fund says the main risk which could threaten Fiji with an economic collapse will be reliance on tourism, a further decline in exports, higher oil prices and increased liquidity.



However, the IMF also included several recommendations aimed at improving government’s finance and other structural reforms to the economy.


Comments posted on Matavuvale.com

  • Hi freedom fighters, a few weeks back the Reserve Bank of Fiji had put out a press release stating its intention to raise the Statutory Reserve Deposit (SRD) from 7% to 8.5%. Last week they sent out another press release indicating their plans to raise the SRD again from 8.5% to 10.00% on 7th July.
  • All licensed commercial banks in Fiji are required under section 40 of the RBF Act to hold a portion of their deposits and similar liabilities with the Reserve Bank. The use of this pool of funds is at the discretion of the army installed Governor and therefore the military controlled government. It will remain a liability in the RBF's books, until the banks close business and leave Fiji. This is very interesting given the direction the country's economy is sliding towards. I wonder whether the RBF will have the ability to pay out those SRDs when the time comes. Very interesting times indeed.



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