.gif)
New Reserve Bank of Fiji governor Sada Reddy said the recent 20 per cent devaluation of the Fiji dollar will stabilize our financial environment.
In an interview with the government’s Ministry of Information, Reddy said Fiji’s troubled economy was in need of investment, a big challenge that needed the “right environment.”
“Investment is critical to that process (ensuring long term economic stability). Our level of investment is not very high; it reached about 20 – 22 percent in 2005-2006 but since then has fallen to around 15 percent of GDP,” Reddy said.
“We need to raise our investment to 20 to 25 per cent of our GDP. That’s a big challenge. We have to provide the right environment for investment to take place. Now, there are some element missing in that and in this regard with devaluation now out of the way it provides a very stable financial environment for people now to consider investing.
“I would urge business sector to concentrate on business, Fiji goes on, we live on. We have to invest and make the most of it,” he added.
Reddy said the stable financial environment should encourage investment to happen.
The devaluation of the currency by RBF also came with two directives targeted at controlling market interest rates.
The new governor slated the banks on their stand on interest rates:
“I have now stabilized the interest rate environment; I have been very concerned about interest rates in the country. Let me explain this particular policy because to me this is more important than devaluation.
“We invited the banks last year at the time of the national budget preparation, we had one on one discussion with the chief managers – look we are going through this very difficult time,” Reddy said.
“Every country is going through difficult times. All sections of the community need to get together partners and assist in this growth process and we pleaded with the Commercial Banks to play a key role in this and they have great ability to do that, I’m sure they will do that but I’m afraid I did not see much progress in this regard.”
He added, “We had asked them by January this year; they should have come up with very clear policies. When I saw two of the Banks increasing interest rates recently, I was dumbfounded. After the discussions we had and for them to go ahead and increase interest rates was not acceptable”.
“So I had to introduce some measure whereby we provide a stable interest rate environment as well. Now I’ve stabilized the currency at different level and I have stabilized the interest rate as well,” Reddy said.
