Economist: Devaluation is long overdue

April 15, 2009 05:42:16 PM

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The devaluation of the Fiji dollar was long overdue, says Australian-based economist Dr Satish Chand.

Reacting to today’s announcement by the Reserve Bank of Fiji of a 20 percent devaluation of the Fiji dollar, Chand said while it would help with the country’s balance of payment situation in terms of curbing imports in the immediate term, it would also impact upon the livelihood of ordinary household

“Its impact on exports will take time and depend very much on investor confidence in the economy,” Chand said.  

Chand said exporters should gain from this devaluation as they will now earn 20 percent more, in Fiji dollar terms, for their exports. 

Their costs, he said, will rise to the extent that imports comprise inputs in their business. 

Importers on the other hand would face the full brunt of the devaluation.

“Workers will face higher prices for their consumption, thus are likely to lose on two fronts. First, their incomes will now afford a smaller bundle of goods than before the devaluation.  Those who have lost jobs will now suffer the effects of inflation,” Chand said.

 He added there was an urgent need to restore investor confidence in the economy. 

“We also need to reassure tourists that Fiji remains a safe and secure destination to visit. 

The devaluation gives Fiji tourism a competitive edge, thus could be beneficial if supporting policies are put in place.”