Is a devaluation of the Fiji dollar in the wind?
I don’t want to be a doomsayer, but the sounds coming out the Reserve Bank of Fiji
are not good. RBF Governor Savenaca Narube’s call to cut consumption sounds a
lot like desperation.
People can’t starve to help the balance of payments. The problem is that export
earnings have slumped. Tourism was badly damaged by the coup and hasn’t
recovered. Efforts to restructure the sugar industry have been hit by the antics of
Chodopu$$, whose only concern is to assert his iron grip on everyone. Gold
investors have been harried and are probably waiting for a real government
before they sink large amounts of their hard earned funds into a country run by
Across the board, investment is at rock bottom levels as a result of the uncertainty
created by an illegal government which shows no respect for the law.
So the RBF says eat less. Savenaca Narube needs to move from his Tamavua palace
and mix with a few more real people. He would discover that food is a basic need that
cannot be easily reduced by poor people.
Chodopu$$ has been aware from the outset that food price rises could bring him undone.
That’s why he cut the small margins of protection afforded to some locally manufactured
goods. But he achieved nothing more than to damage local industry and create more
unemployment when Fiji could afford it least.
Chodopu$$ has been scared witless by the prospect of a devaluation which would send
inflation, already high, rocketing into the heights of a true banana republic. He has no
doubt been pulling every trick in the book to hide problems, but economic fundamentals
will not be bullied like political opponents or newspaper editors.
The democracy of the market is pervasive and persistent. It can only be slowed for so long,
and the longer it is delayed, the worse things get.
Like a wall of flood water created by levee banks, when the waters keeps rising and
eventually over top the levees, the result is devastation. I don’t want to see the currency
devalued, but if it does happen, let’s hope it sweeps away the incompetent, illegal gang
of thugs who have hijacked Fiji and its future.
In December 2006 Fiji’s currency faced serious problems. The coup then made devaluation inevitable. The incompetent Minister for Finance would have been smarter to have accepted
the advice of economists last year to devalue the currency, instead of trying to lie and bluff
his way through.
Anyone looking for signs of the inevitable devaluation should look at the Reserve Bank’s announcement of relaxation to the Forward Foreign Exchange Cover Facility. Narube said commercial banks could now enter into forward foreign exchange contracts with local
importers of rice, wheat, flour, edible oils and milk to hedge against future price increases.
How is this change a sign of impending devaluation? Look at the FTIB website which
describes the purpose of the Forward Foreign Exchange Cover Facility as “the Reserve Bank allowed commercial banks to withhold currency at the end of a trading day instead of selling
to the Reserve Bank, to build up positions up to the limits on net open positions. The forward foreign exchange contract protects the exporter or importer from THE POSSIBILITY THAT THE FOREIGN CURRENCY WOULD BECOME CHEAPER OR EXPENSIVE IN THE FUTURE.”
I don’t think anyone is expecting the Fiji dollar to go up in value, so work it out for yourself.
With every day that passes it is clear that only the pigs with snouts in the trough are not
feeling the impact of the economic calamity visited upon Fiji by the actions of a selfish
coterie of coupsters in December 2006. Things will not get better until the rule of law is
restored in Fiji.