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The Reserve Bank of Fiji has removed the credit ceiling put on banks as foreign reserves have now improved to comfortable levels.
Governor Sada Reddy confirms the removal is effective from today.
According to Reddy, foreign reserves are currently around $920 million.
“Liquidity in the banking system is buoyant at around $260 million. The commercial banks’ average lending rate which has been gradually falling in recent months declined further in July to 7.77 percent from 7.96 percent a month ago.
“These easings in monetary conditions, as well as the removal of the credit ceiling, should support economic recovery as we move forward,” Reddy said.
The credit ceiling was implemented in December 2006 to prevent any capital flight in light of the political developments.
“As foreign reserves have now improved to comfortable levels, the Board decided to remove the credit ceiling and assist with the recovery of the economy,” Reddy said.
However, he said the guidelines given to commercial banks with respect to priority sectors will remain in place and banks have been urged to strictly comply with these.
“The Reserve Bank will be monitoring commercial banks’ lending to these sectors closely.
As much as possible the financing of luxury imports is to be discouraged.”
On the domestic economy, Governor Reddy noted that “sectoral performances were mixed”.
He said while consumer spending was subdued there is cautious optimism of a pickup in the remaining months of the year, particularly for tourism and investment-related activity.
This he said, is consistent with the gradual global recovery supported by a favourable exchange rate and other fiscal and monetary policies.
Reddy added that while the pickup in domestic activity should strengthen next year, investment sentiments also appear to be improving.
Consumer prices rose over the year by 2.2 percent in July, compared to 2.3 percent in June.
He also highlighted that the lower inflation in July was a result of much lower prices of energy-related items relative to 2008, which have offset to a large degree the recent price increases in other items.
