RBF explains why FNPF must wait

October 26, 2009 07:07:13 AM

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The Reserve Bank of Fiji will begin to allow local institutions like the Fiji National Provident Fund to invest offshore once it is satisfied with the level of foreign reserves.

“It’s very simple why we’re not allowing FNPF and others not to invest offshore. It’s because of the reserves level that we have, it’s very volatile at the moment,” said Inia Naiyaga, senior advisor to RBF governor Sada Reddy, in an interview with FijiLive.

Early this month, FNPF’s chief executive officer Aisake Taito told FijiLive that the Fund had made a number of submissions to the RBF to allow them to diversify some of their $3 billion investment portfolio overseas.  

A directive by RBF in 2005 forced the pension fund to liquidate all offshore investments and bring the funds back into Fiji. This resulted in the FNPF repatriating some $300 million into Fiji in an exercise that took a year to complete.

Now, the fund is having to settle for a very narrow domestic investment market and at one point had to hold close to half its remitted funds as cash in local banks.  

“The Reserve Bank’s view right now is we have to build the reserves up slowly to about five months of import cover. Once we’ve reached that, then we can start relaxing all these exchange control policies on investment outside,” Naiyaga explained.

While the last announcement on foreign exchange levels from RBF showed that the country now had over F$1 billion in reserves, boosted by assistance financing from the International Monetary Fund, Naiyaga said more work is still needed.

“It’s over a billion dollars today but it’s only enough for around three to four moths cover.  We need to reach five months - then it will be okay,” he said.  

FNPF currently holds most of its investments in government and quasi-government papers.