DIRECT controls imposed on commercial banks in early April by the Reserve Bank of Fiji to help maintain liquidity in the banking system and stimulate economic recovery, will be lifted in January 2010.
The decision was made at the RBF's board meeting on Thursday.
The RBF board decided that specific exchange control transactions would be delegated again to commercial banks and foreign exchange dealers with increased limits.
It also decided to remove lending and interest rate spread policies.
"The bank (RBF) will now increase the delegation limit of specific transactions to the commercial banks and foreign exchange dealers," Mr Reddy said.
From January 1, 2010, the Reserve Bank will increase the following exchange control delegation limits:
o travel will be increased from $5000 to $10,000;
o charge, fees and services; airline ticket sales; loan repayments and lease payments will all be increased from $50,000 to $100,000; and
o education and medical expenses to increase from $500 to $1000 paid to a student or patient.
He said the limits were maximum amounts delegated to authorised exchange dealers and requests must be made to the central bank for any excess amount.
Mr Reddy said advice on lending and interest rates to maintain the trend in lending rate and "any increase in spread above 4 per cent in the future will have to be fully justified and explained to the RBF".
Local financial adviser Gilbert Veisamasama said this announcement should cause celebrations in local banking circles.
He said commercial banks had been under pressure to reduce their interest spreads and margins ever since the controls were introduced.
"The change in policy stance arose after the IMF (International Monetary Fund) made comments regarding the policy mix used by the central bank to conduct monetary policy and urged the authorities to "utilise more market-based instruments.
"In recent years the Reserve Bank of Fiji has been reinstating direct controls to contain credit for example, increases or reductions in statutory reserve deposits (SRD) and controls on interest spreads or margins after earlier making a move to use more market based instruments," Mr Veisamasama said.
