Reacting to the 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.
He 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 that 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,” he said.
The devaluation gives Fiji tourism a competitive edge, thus could be beneficial if supporting policies are put in place, he added.
Meanwhile, the Association of Banks in Fiji said the devaluation of the dollar will have a positive impact on the export sector and boost the tourism industry, according to Fiji Times.
Association president John Cashmore said people should, however, be mindful of the rise in the cost of living which should subside over the next 12 months.
The statement issued by the Reserve Bank of Fiji on the devaluation also outlined the regulation of lending rates of banks.
The weighted average lending rates of banks and other lending institutions, including FNPF, will be kept at the level as at Dec. 31 last year and the adjustment is to take place within three months.
The interest rate spread of banks must be reduced to 4 percent or below by Dec. 31, 2009. This policy will be reviewed in 12 months.
The banks have also been directed to set up specialized micro-finance service centers in all their branches by January next year. The Reserve Bank will support this setup by creating a micro-finance research and development unit headed by a chief manager.
