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Higher savings key to high investment

Timoci Vula
Friday, November 16, 2012

FOR any economy to achieve high investment activities, higher savings are needed, the Capital Markets Development workshop heard on Wednesday.

And developing the capital market was the signal indicated to encourage more savings.

Around the globe, Finance permanent secretary Filimone Waqabaca says, strong economies are usually associated with higher savings rates. Not quite in Fiji's case.

He said the country's savings rate was relatively quite low, and even lower if mandatory savings with the FNPF was excluded.

"In this sense, a well developed capital market would encourage more savings and, therefore, a diversified source of investment funds," Mr Waqabaca said.

He said with diversified sources of funds and competitive interest rates, more investments were likely to happen, thus contributing towards the government's investment target of 25 per cent of the gross domestic product (GDP). Another key advantage of the capital market, Mr Waqabaca said was that it provided an alternative source of financing to complement bank financing. He said this would reduce the overdependence on the banking sector and spread the concentration of credit risk.

Reserve Bank of Fiji governor Barry Whiteside said at the RBF, it was time for a fresh, forward-looking approach (to develop the capital market). He said his hope was for the workshop to shape strategies and provide necessary commitments from all stakeholders to move this sector forward.





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