Drop in reserves
2 April, 2018, 12:00 am
FIJI’S foreign reserves fell over the month of February to $2,156.9 million as of March 29, sufficient to cover 4.9 months of retained imports of goods and non-factor services (MORI).
This was highlighted in the Reserve Bank of Fiji’s Economic Review for the month ended March released last week.
Foreign reserves remained at comfortable levels at about $2,160.0m as of February 28 dropping from $2,181.6m in January.
While the external sector was stable in 2017, foreign reserves had increased over 2017 by $351.6m to $2,272.8m at the end of 2017.
But the central bank has forecasted that foreign reserves levels were expected to remain comfortable until end-2018.
Foreign exchange reserves are pools of foreign currencies held by central banks to assist the international trade of goods and services.
In simpler terms, it helps pay for Fiji’s imports since we do not produce all the goods we need. They also assist us in meeting our external debt commitments and, facilitate transactions by our people who travel abroad and need foreign currencies.
Since Fiji is a small open economy affected by external factors such as rising commodity prices and natural disasters, the central bank targets to have a buffer above the international benchmark.
So the target is a minimum of four months of retained import cover (MORI).
Meanwhile, the RBF board agreed to maintain the overnight policy rate (OPR) at 0.5 per cent. In announcing the decision, RBF governor and board chairman Ariff Ali highlighted that the RBF’s dual monetary policy objectives of stable inflation and adequate foreign reserves remained intact with no immediate downside risks.
On the global front, Mr Ali stated that consistent with strong global growth prospects, Fiji’s major trading partners were expected to achieve positive growth this year.
“This augurs well for the domestic economy through increased trade, remittances and tourism receipts,” Mr Ali said.
He added that unless threats to the RBF’s dual mandate emerge, the current accommodative monetary policy stance would remain. Nevertheless, the Bank will continue to monitor international and domestic developments closely and align monetary policy where appropriate.