LOCAL economist, Doctor Chandra Dulare has challenged the perception of most economists that the economy can only be saved through the devaluation of the Fiji dollar.
Speaking at a public lecture yesterday on "Revitalising the Economy: Interest and Exchange Rate Options", the University of Fiji's Dean of Business and Economics said there was absolute no need for devaluation.
Dr Dulare argued that since the country's foreign reserves had stabilised, the option of devaluing the Fiji dollar should never be explored.
Dr Dulare said under normal circumstances there was an increase in foreign reserves during the mid year so the expectation was that the current level of foreign reserves would grow.
He said devaluing the Fiji dollar was a wrong option because the country was less competitive as a result of other factors and not market forces.
"We are less competitive, not because of market reasons but because of the increase in Value Added Tax a few years ago and the recent increase in import duties," said Dr Dulare.
Dr Dulare also warned that government and other financial institutions should not try and use interest rates to stabilise the economy.
Dr Dulare said as far as interest rates were concerned, it did not affect consumption or demand.
He said fixed exchange rates were the option that Fiji had to explore because this was not the time to implement flexible exchange rates that fluctuated according to various market forces. When asked why other economists were calling for devaluation, he said there were two types of economists neo classical and post Keynesian.
"The neo-classical economists that follow free market principles always call for a free market and usually demand de-regulation on a general basis while the post Keynesian economists like myself monitor and assess the different situations for different countries," he said.
Dr Dulare's statements yesterday set a platform of debate following recent calls by renowned economists like Professor Satish Chand, the associate professor of International and Development Economics at the Australian National University for devaluation.
During a seminar at the University of the South Pacific in July, Professor Chand said the Fiji dollar was overvalued by as much as 12 per cent, and the only solution was devaluation.
Professor Chand said while devaluation would cause Fiji a lot of pain, it did not have much of a choice.
Also in an economic survey paper compiled on Fiji this year by Professor Chand titled "Swim or Sink: the predicament of the Fiji economy," he stated that in order to restore external balance, the Reserve Bank of Fiji would ultimately be forced to devalue the Fiji dollar.
"The longer the Reserve Bank of Fiji holds out against devaluing the dollar, the larger the correction that will be necessary when its hand is forced."