Press Release No. : 14/2023
Date : 31 August 2023
RBF Maintains an Accommodative Monetary Policy Stance
The Reserve Bank of Fiji (RBF) Board agreed to keep the Overnight Policy Rate at 0.25 percent today.
The Governor and Board Chairman, Mr Ariff Ali stated that the accommodative monetary policy stance remains appropriate to support the economy’s recovery given the dampened global growth prospects. Domestically, recent indicators suggest that economic activity, mainly led by the tourism sector, is expanding in line with projection. Visitor arrivals totalled 511,335 cumulative to July, 79.9 percent higher than the comparable period in 2022. Hotel occupancy rates and revenue earned from rooms sold up to July were higher than the same period in 2022 and 2019. This positive trend is expected to continue over the next few months given the high forward bookings, increased flight capacity with the purchase of the new Airbus by the national airline and the introduction of new flying routes.
Mr Ali added that labour demand is robust due to the economic recovery and the departure of workers abroad. Tighter labour market conditions have also resulted in higher remuneration and increased income levels, which combined with the solid recovery and remittances (+22.8% cumulative to July) have boosted consumption activity. Furthermore, commercial banks’ new lending for investment purposes and domestic cement sales noted annual gains in the year to July, signalling a stable recovery in investment activity. Investment spending is expected to pick up now that there is more clarity on the Government’s tax policies and expenditure plans. In contrast to the buoyant aggregate demand and tourism performance, sectoral production such as sugar, gold, timber and mineral water have been broadly weak due to industry-specific challenges.
The financial system is stable and adequately capitalised with downward trend in non-performing loans ratio. Banking system liquidity is ample at over $2.4 billion (as of 30/08) keeping lending rates low and supporting the expansion of private sector credit (5.4% in July).
On the RBF’s twin monetary policy objectives, Mr Ali mentioned that while domestic inflation had moderated in the earlier months of 2023 in line with the fall in global prices, it is expected to pick up from August as tax changes announced in the national budget take effect. In addition, the recent upturn in global food and fuel prices imply that the year-end inflation forecast is now upward biased. Foreign reserves are at comfortable levels (close to $3.6 billion as of 31/08), sufficient to cover 6.3 months of retained imports of goods and services and are projected to remain adequate in the medium term.
The RBF will continue to monitor incoming information and its implications for the current outlook and align monetary policy accordingly.
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