Recently, the Reserve Bank of Fiji announced that foreign reserves would be recorded under a new definition. The Governor of the RBF, Mr Savenaca Narube, said that “official foreign reserves would now include foreign reserves held by other local institutions.” What does this mean? Why did the Bank implement this change? Is the change in line with international practices? We will attempt to answer these questions in this article.
Firstly, let’s consider the previous definition of foreign reserves. Up until now, official foreign reserves in Fiji included only those reserves actually held by the RBF. In other words, only the foreign assets listed in the Bank’s balance sheet were considered as the nation’s holdings of foreign reserves.
In fact, initially, only the Reserve Bank was allowed to hold foreign assets or reserves. However, as our economy strengthened and the financial sector developed, the Bank allowed financial institutions, like the Fiji National Provident Fund, to hold and invest foreign reserves offshore.