Savenaca Narube was removed as Governor of the Reserve Bank of Fiji after the abrogation of the Constitution on Good Friday. He's replacement was Sada Reddy, the Deputy Governor.
Mr Reddy's first act was to devalue the dollar by 20 percent effective immediately.
The devaluation by such a magnitude must rank alongside the 1987 coup and the several abrogations of the Constitution as one of the most severe actions taken by any Fijian administration.
Following the 1987 coup we had two devaluations. But the devaluation announced today by 20%, effectively reducing the buying power of the Fijian dollar by one-fifth is unprecedented.
There can be no denying now that we are in serious trouble folks.
The smart businessman who are well connected would have been tipped off and squirreled their loot offshore before this announcement. The common man and woman will now pay more for all our imported products.
So next time you go to the shops to buy noodles, mackerel, powdered milk and just about anything else, you will pay more.
And this is on top of the inflation rate which surely must rank in the double digits now.
The Fijian economy has been hit hard before, inevitable when you consider the amount of political turmoil we have had. But we have come out without the economy collapsing.
Economies such as Argentina collapsed, but we remained steadfast. Zimbabwe has introduced a billion dollar note to buy a single loaf of bread. In Zimbabwe, the loaf of bread which you bought for 1 billion in the morning costs 2 billion the following day. No kidding, its called hyper-inflation.
We are some way away from being that far gone, and probabaly wont unless the Reserve Bank starts printing more money.
But folks, things don't look to good this time round.
The factors that kept our economy going are not as strong this time around.
Sugar industry is almost gone with the South Pacific Fertilizer factory nearing closure and if fertiliser is to be imported, the cost will become prohibitive and the sugar cane industry will be good as dead. The riches from mahogany has not flowed like we were led to believe. Tourists are finding alternative venues such as Vanuatu and Samoa safer .
Last but not least, the timing of Narube's departure and the announcement of the devaluation is rather curious. Did Narube resist political pressure to devalue the Fiji dollar and was asked to ride off into the sunset?
Did he jump or was he pushed?
Economics Desk
3 comments:
From what I've heard, Narube was resisting the move to devalue the dollar for some time. Sada Reddy has been the key proponent of the moves to devalue, even during Narube's tenure.
It's no secret that Reddy has been drooling for the position of RBF gov. for many years. What's perhaps ridiculous is that Fiji was in absolutely no dire straits as predicted by Reddy in his inuagral address where he mentioned that Fiji would soon face the global financial crisis. We had been functioning without any problems and would have continued to do so because NZ and Aus were taking the full brunt of the storm for us. This move to devalue simply because of a financial meltdown fear is foolish if anything.
Obviously this move only serves to reinforce that our reserves are being depleted at a faster rate then we initially thought. The question we need to ask now is how long can Fiji internally sustain this devaluation if the cost of living does not change and the economic/financial liquidity continues at a sluggish pace?I am certain that Frank was not informed accurately by his RBF advisor and perhaps this may do greater damage to his vision then he realizes.
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The value of the dollar over time represent the countries economic strength. If a country is doing well and growing exports will icnrease people will invest and the reserves will grow. However Fiji has been struggling for a number of years now.
The devaluation was long overdue but the flow on effects can be unpredictable. Yes there will be inflation but there will also be substitution to more local product - casava instead of rice and bread.
If the economy can survive the next 3 months things will get a lot brighter as Fiji will be more attractive for Tourists.
Sugar industry was dead in anycase
Fiji will move on regardless of what!!!the devaluation is not the end of the road.After the hardship the bighter side will start to appear.
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