22 May 2007

Fiji rules out devaluation

7:28 am on 22 May 2007

The Reserve Bank of Fiji says there will be no devaluation of the Fiji dollar.

The Fiji Times reports that the assurance comes amid speculation that a devaluation of about 15% is being considered to salvage the economy.

The newspaper quotes the deputy governor of the Reserve Bank, Sada Reddy, as saying there is no intention to devalue the Fiji dollar.

The head of the Prime Minister's office, Parmesh Chand, says the interim administration is not giving any consideration to devaluation.

A senior economist at the University of the South Pacific, Dr Mahendra Reddy, says any move to devalue against the currencies of Fiji's major trading partners would do more harm than good.

Dr Reddy says the causes of low growth of the export sector have to do with the fundamentals of the economy which include political instability, the inability to resolve land lease problems, and travel advisories which inhibit tourism.

An economist at the University of Fiji, Dr Chandra Dulare, says devaluation would be disastrous because it would blow out the import bill, lead to massive price increases and higher inflation.