Press Release: 33/2020
Date: 11 December 2020
The Honourable Minister for Economy, Mr Aiyaz Sayed-Khaiyum, tabled the August 2019–July 2020 Annual Report of the Reserve Bank of Fiji (RBF) in Parliament on 11 December 2020. The Report included the audited accounts and an update of the key activities and work undertaken by the Reserve Bank for the financial year (FY) ending 31 July 2020.
The Governor of the RBF, Mr Ariff Ali highlighted that the first seven months of the 2019-20 FY was marked by the synchronised global slowdown, triggered by the US-China trade tensions, whilst the remainder of the review year was even more challenging with the outbreak of the COVID-19 pandemic across the globe. Consequently, the Fijian economy is forecast to contract sharply by 19.0 percent in 2020, following a decline of 0.4 percent in 2019. The downturn in 2020 reflects weak global economic conditions, sluggish sectoral performances to date as well as deteriorating business sentiments and soft consumer confidence. Aggregate demand has deteriorated significantly compared to a year ago as consumer spending and private sector investment remain sluggish. Nonetheless, the overall financial system remained sound during the fiscal year, with gross assets totalling around $22.8 billion at the end of June 2020. Going forward, the economic recovery for 2021 is anticipated to range between 1.6 percent and 8.0 percent, contingent on the recovery in visitor arrivals along with the expected positive spillovers to tourism-related sectors.
Mr. Ali stated that the Reserve Bank’s twin monetary policy objectives of low inflation and adequate foreign reserves remained intact. Annual inflation averaged -1.3 percent during the FY and was -1.6 percent in July 2020. The outcome was largely driven by lower prices of yaqona, fruits & vegetables and domestic fuel. Foreign reserves stood at $2,107.0 million at the end of July 2020, sufficient to cover 7.0 months of retained imports (MORI).
Despite the challenging global environment with substantially low interest rates, the Bank reported a net profit of $30.1 million for the 2019-20 FY, slightly higher than the $28.9 million recorded in the preceding year. A transfer of $31.8 million was made to Government in September this year comprising $29.1 million of the Bank’s net profit (after a transfer of $1.0 million to General Reserves) and $2.7 million from the Revaluation Reserve Account, as required under section 34(3) of the RBF Act.
Governor Ali noted that the Bank implemented a range of policy measures to mitigate the ill-effects of the COVID-19 pandemic. The Overnight Policy Rate was reduced from 0.50 percent to 0.25 percent in March, while the Natural Disaster Rehabilitation Facility was recalibrated to Disaster Rehabilitation and Containment Facility with additional funding of $60 million to assist businesses affected by the COVID-19 with concessional financing. In addition, concessional funding under the Import Substitution & Export Finance Facility was increased by $100 million to $300 million. Moreover, the Bank tightened exchange control measures to prevent capital flight and safeguard foreign reserves, and injected bank liquidity through its investments in Government bonds.
1 The Annual Report can be downloaded from the RBF website at www.rbf.gov.fj
2 MORI cover is based on the Macroeconomic Committee forecast as at November 2020.
In protecting its financial stability mandate, the RBF enhanced its surveillance of supervised institutions, particularly the banking sector and the FNPF, when the COVID-19 pandemic began. In line with the holiday repayments rendered by all supervised lending institutions, necessary reporting was put in place on the closer monitoring of the financial hardship portfolios and the provisioning levels that commercial banks and credit institutions were undertaking. Regular macro-testing was conducted by the RBF to provide an outlook of the worst case impact of COVID-19 on the banks’ loan books, amidst the various actions taken by licensed financial institutions to ensure that the impact of COVID-19 is minimised. While the RBF pulled back on some of its plans on prudential policy development and review, it continued to work internally on the finalisation of the review of the prudential policy on the Management of Liquidity Risk for banks and credit institutions as well as the development of a prudential policy on the Management of Cyber Risk for all supervised institutions. Both these policies are scheduled to be provided for industry consultations in the next year, before being finalised for implementation.
The RBF also launched its Strategic Plan (2019-2024) in August 2019 and introduced the FinTech Regulatory Sandbox Guideline in December 2019, a framework which aims to foster the responsible development of innovative solutions in Fiji’s financial sector. In addition, work on the $50 banknote and 50 cent coin in commemoration of the country’s 50th anniversary of independence was completed during the financial year. The new banknote and coin were launched on 7 October.
Mr Ali highlighted that the Bank is committed to delivering its statutory responsibilities to all stakeholders and will continue to enhance its role in responding to crises, promote financial inclusion, carry out necessary reforms in the financial sector and strengthen research through collaboration with key partners.
In conclusion, the Governor and the Board of Directors extended their appreciation to the RBF staff and stakeholders for their support in achieving the Bank’s key objectives during the 2019-20 FY.