Foreign reserves at $2.18bn

The Resrve Bank of Fiji (RBF). Picture: FILE

FIJI’S foreign reserves (RBF holdings) stood at $2.18 billion (bn) at the end of April enough to cover five months of imports, the central bank stated in its latest review.

This is a slight improvement from the $2.15bn recorded in March.

But when compared to last year, the RBF noted that our foreign reserves were at its highest level in July at $2.31bn.

At the end of 2017, it was around $2.27bn which was enough to cover 5.4 months of imports.

While the RBF’s twin objectives of an adequate level of foreign reserves and low inflation remain intact, the decline in foreign reserves over the month of March led to a drop in liquidity, as measured by banks’ demand deposits (BDD).

The country’s liquidity level fell in March by 4.7 per cent to $536.5m because of a decline by $3.1m of our foreign reserves, increases in currency in circulation by $11.3m and statutory reserve deposits by $5.2m.

As at April 27, 2018, BDD stood at $540.6m.

Foreign reserves are predominantly maintained in the currencies of the Fiji dollar basket, namely the US, Australian and New Zealand dollars, the Japanese Yen and the Euro.

The RBF also holds IMF Special Drawing Rights and minimal portions of gold and the British Pound.

Foreign reserve assets are important to ensure flexibility and resilience to central banks. If a currency crashes or is devalued, central banks has other currencies to help them withstand such markets shocks.