FIJI VISITOR ARRIVALS BREAK NEW JUNE RECORD

Posted on Tourism Fiji - 27 September 2010

For the third month running Fiji's international tourist arrival numbers have broken new ground with figures released by the Fiji Bureau of Statistics this week showing the destination set a new record in June hosting just under 56,000 visitors.

The 55,995 figure achieved for the month easily surpasses the previous highest ever visitor arrival figure - and four-year record - set in June 2006 when Fiji welcomed 52,795 international arrivals

The June 2010 figure brings total arrivals for the year to 272,520 – bang on course for the national tourist office’s target of 600,000. That figure in itself sets a new benchmark for Fiji and in the process eclipses the previous record set for a January-June period in 2008 – a total of 270, 856 - by an additional 1664 visitor arrivals.

An exuberant Tourism Fiji CEO Josefa Tuamoto (picture above right) drew attention to the ongoing strong performance being achieved in Australia which once again smashed all previous visitor figures for a month of June.

Numbers for the period reached a huge 27,651 arrivals - a massive 48.3 per cent increase over the corresponding period in 2009. Mr Tuamoto also pointed towards the positive inroads being achieved in the New Zealand and US markets, both of which had registered substantial gains over the six month period with visitor arrival growth increasing exponentially by 16.4 and 9.1 per cent, respectively.

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Mr Tuamoto said he was particularly gratified with the national tourist office’s ongoing efforts in several key emerging markets, and in particular China and India which have seen both countries emerge this year as respective eighth and ninth most important sources of visitor arrivals. Visitor arrivals from China increased by 31.3 per cent to reach 7684 for the six month period.

Indian visitor arrivals also climbed impressively reaching 1437, an increase of 28.6 per cent. Mr Tuamoto said traffic from the UK/Europe had also increased by 3 per cent.

"We are still bang on course for the 600,000 'best ever visitor' target we set ourselves last year.” Fiji's best ever international visitor figure remains the 582, 602 benchmark set for the 12 month period January – December 2008.

For further information, contact Tourism Fiji’s Manager Fiji, Ms Fane Vave at fvave@tourismfiji.com.fj or Marketing Officer, Mr. Iowane Naivalurua at inaivalurua@tourismfiji.com.fj

Fiji lacks internet reach

Mary Rauto

FIJI TIMES - Monday, September 20, 2010

FIJI'S Internet penetration rate is only 10 per cent compared 

to smaller countries like Niue, Tokelau and Tuvalu.

Commerce Commission chairman Dr Mahendra Reddy said while information and communication technology can have a profound impact on the economic growth and development of a country, ICT development in Fiji did not fare well when compared with our neighbours.

"In terms of Internet penetration, Fiji has a rate of 10.9 per cent as at 30 September 2009," he said.

"However, Australia and New Zealand have 80.1 per cent and 79.7 per cent respectively."

Dr Reddy said the Cook Islands had 42 per cent, French Polynesia 31.4 per cent, Guam 47.6 per cent, Micronesia 14.9 per cent, New Caledonia 37.4 per cent, Niue 62 per cent, Palau 26 per cent, Tokelau 58 per cent and Tuvalu at 34 per cent.

"This is quite worrying stats," he said. "Especially when for international communications, Fiji is directly linked to the Southern Cross Cable Network, a third generation submarine fibre optic cable system with direct links to Australia, New Zealand and the US West Coast via Hawaii."

Declining FNPF contribution a concern

Posted on Matavuvale.com -By Rachna Lal - July 21, 2010 

A Fiji academic says member contributions to the country’s only superannuation; the Fiji National Provident Fund (FNPF) peaked in 2006 but then started reducing from there on.

Dr Rohit Kishore, a senior lecturer at the University of the South Pacific’s School of Accounting and Finance, speaking at the Fiji Economy Update 2010 said this is mainly due to mass migration.

“The other major issue is people are taking out their benefits more than contributions being made which will finally have an impact on our social security,” he stressed.

He highlighted the withdrawal in 2009 was $75.43 million compared to $57.9 in 2008.

Kishore attributed most of the withdrawals to migration, partial withdrawals and people taking money out upon retirement.

“People should be mindful that these money is o provide cushion when people get old and if they keep taking little money out for small difficulties, then they will find it more difficult in the future.”

He acknowledged FNPF tightening the withdrawal policy which will automatically deter people from withdrawing from this superannuation fund.

Kishore is hopeful future investments by the FNPF will be based on careful decision and the end result will see members receiving maximum interest from FNPF.

Comments posted on Matavuvale.com

• the major contributing factor of decline in fnpf contribution is the rising number of unemployment.
• Why should people be paying into a pool of money that is being used to suppress them? Those who conribute into it should be allowed to withdraw it when they leave the country. But I know that this is not the case anymore, I have family members who are not allowed to take out their contribution even though they have moved abroad.
• Massive withdrawals, unemployment, mass migration, partial withdrawals, failed projects and worst still the regimes loans have really killed the bull. Once upon a time this was the pride of the nation. Not anymore.
  It's a white elephant.
  1.
  a.A rare, expensive possession that is a financial burden to maintain.
  b.Something of dubious or limited value.
  2.An article, ornament, or household utensil no longer wanted by its owner.
  3.An endeavor or venture that proves to be a conspicuous failure.

Moving Fiji out of the doldrums

Fiji Sun News - 13 July 2010

Association of Banks in Fiji chairman, Rakesh Sharma, shares his views to the Fiji Sun about the June issue of the Reserve Bank of Fiji’s Economic Review. SUNBIZ: How does the global economic recovery and the International Monetary Fund forecasts affect Fiji and the ordinary people? MR SHARMA: Let’s take Fiji. In the present global scenario, no economy can stay isolated from the global events more so from the negative impacts. It has been quite significantly demonstrated in East Asian Crisis in 90s, in Sub Prime Debacle and in more recent Sovereign crises of Greece and other European countries. If these crises have negative shocks, the recoveries are surely going to have the much needed positive impact globally. Fiji’s economy is characteristically very much dominated by the events happening in its major trading partners. Moreover, it is largely depending upon these partners for growth of major industries/sectors. For instance, increase in tourist arrival of more than 22per cent in the first four months of current year in the direct effect of global recovery. This can be attributed to the recovery in major trading economies. Tourism being major foreign exchange earner, increase in tourist’s arrival will result in growth in other sector also. It will result in increase in capacity utilization of tourism related sectors, increase in VAT and payee collections, growth in GDP, of which tourism sector in a prominent contributor and increase in foreign exchange. Recovery in economies of trading partner will encourage buying from Fiji the products like fish, timber, gold, mineral water and consequently increase export earnings. Indirect impact of global recovery can be observed in increase inward remittances also. We can therefore, expect a positive impact on Fiji in medium and long run, provided the recovery in major trading partners is consistent and sustained. For the ordinary people; it’s an increase in employment in tourism and other sectors. Resulting in increase in wages, purchasing power and consumption, which is the most positive contributors to the economic development. However, such impact may not prominently be visible in the short run. SUNBIZ: The commercial banks lending for investment purposes rose. What are the benefits of this on Fiji’s economy? MR SHARMA: Increased investment is a welcome feature and an important indicator of progress in economy. It signifies increase in business and investor’s confidence. The positive growth in tourism has encouraged investment in real estate for increasing room inventory, building tourist resorts and development of lots for sale to foreigners. Investment in infrastructure and manufacturing units (plant and machinery) is a very welcome feature as it is a prerequisite to any economic development. These activities again result in employment generation, increased income, purchasing power and consumption. SUNBIZ: How does inflation affect consumers? MR SHARMA: Inflation is a phenomenon, which is prominently visible in almost all the economies in the world. External stimuli employed to combat the global crises had direct bearing on rising inflation. However, in a developing economy inflation can never be neutralised but it can be at the most controlled. Price rise is a welcome phenomenon, signifying economic development, unless the rise is hyper or galloping. Rise in prices is always a burden on people and consumers. In the current environment the people have no choice but to live with it. SUNBIZ: Your comment on Fiji’s foreign reserves Fiji? MR SHARMA: Foreign Reserves of Fiji constitute; A) Foreign investments B) Inward remittances C) Special Drawing Rights Special Drawing Rights (SDRs) are costless assets that increase a nation’s foreign exchange reserves without the need for an actual transfer of funds. Allocated to nations by the International Monetary Fund (IMF), a SDR represents a claim to foreign currencies for which it may be exchanged) Overview of Economic Review is summarised as follows: World Economy- Global economy is recovering and it is forecast to recover at 4.2per cent for the current year. Developing economies are expected to grow at a higher rate than the developed economies. Fiji Economy- Fiji’s economy is improving. The economic performance of Fiji’s major trading partners has improved. Positive outlook for Fiji may be reinforced on the basis of following indicators: 1. In April, Tourists arrival increased by 22.7per cent. 2. VAT collection (April 2010) showed increase of 9.5per cent. 3. Commercial Banks lending for investment rose by 4.5per cent. Lending for consumption rose by 3.9per cent. 4. Inward remittance rose by 32.5per cent. 5. Inflation declined to 9.4per cent in May 2010 from 10.5per cent in April 2010. 6. Domestic export earning rose by 74.4per cent in Jan 2010 as compared to (-) 41.8per cent in 2009. 7. Foreign reserves position improved with 3.5 months of import. 8. Banks’ liquidity level is higher. Reserve Bank Fiji has increased SRD rate to suck extra liquidity to curb inflation. However, uncertainty looms large over the growth of economy in the current year as is evident from the frequent change in growth forecast and other estimates. In the most recent news, doubts are expressed on New Zealand’s economic recovery. In this volatile situation, we need to keep our fingers crossed and hope no further global or natural crisis hits Fiji and the world.(Note: Mr Sharma would like to clarify that views expressed in this interview are solely his and not of Bank of Baroda or any other organisation).

State looks at possible Post Fiji options

Story by: Rachna Lal

Fiji Live News - July 04, 2010 

The Fiji government is currently looking at a possible public-private partnership in regards to Post Fiji.

The Prime Minister Commodore Voreqe Bainimarama confirmed this at the 2010 budget announcement on Friday.

“Government is currently assessing proposals on public-private collaboration regarding the management of Post Fiji,” he said.

Bainimarama added the Government Printing is expected to be made available on the market within this year.

The PM also established that initial works on the re-organisation of the Fiji Electricity Authority (FEA) has already begun.

“The restructure of the electricity tariff rates have commenced which will buffer the poor but concomitantly reflect market prices and incentivize independent power producers (IPPs),” he said. 

He said IPP’s generally use renewable energy to supply the national grid.

“This has an added advantage as it reduces our dependency on fossil fuel and is better for the environment,” Bainimarama said.

He also said the Fiji Meteorological Services Department has also been identified for reorganization with an assessment in train to determine the best option forward.

ATH 2010 Profit Slumps 53 percent

July 01, 2010 

Fiji’s Amalgamated Telecom Holdings Ltd has announced a group consolidated next after tax profit of $15.4 million for the year ended March 31, 2010, a 53.5 percent drop on the $33.1 million profit the previous financial year.

Chief executive officer Tomasi Vakatora said the reduced profit was due to a combination of a decline in sales revenue and increase in expenses and the incurrence of “abnormal or one-off items”.

Vakatora said the figure was in line with projections announced on May 19.

Sales revenue declined by 10.4 percent and was attributed to retail price reductions “of which some were taken at the ATH Group’s initiative in response to market conditions and others through various determinations by the Commerce Commission over recent years”.

Other contributing factors were “intensity of competition and consequent loss of some market share and relatively weak trading conditions from the flow on effects of the global financial crisis onto the Fiji economy”.

Vakatora said that despite the reduced profit, ATH directors were proposing a final dividend of 2 cents per share totaling $8.442 million.

The dividend will be submitted for approval at ATH’s annual general meeting on August 19.

The proposed final dividend is in addition to the interim dividend of $12,663,146 paid in March 2010, bringing the total dividend for the year to $21, 015, 524.

The ATH stable includes ATH, Telecom Fiji Ltd, Vodafone Fiji Ltd, Fiji Directories Ltd, Internet Services Fiji Ltd, Transtel Ltd, Exceed Pasifika Ltd, ATH Technology Park Ltd, ATH Call Centre Ltd and Pacific Emerging Technologies Ltd.

Fiji Media Crackdown To Hurt Economy, Foreign Investment

Fiji Media Crackdown To Hurt Economy, Foreign Investment - Australian Minister

By Neil Sands - 

JUNE 29, 2010

Of DOW JONES NEWSWIRES

MELBOURNE (Dow Jones) A crackdown on foreign media ownership in Fiji will damage the island state's economy and deter foreign investment, Australian Foreign Minister Stephen Smith said Tuesday.

Smith condemned a Fijian decree imposed this week forcing all media outlets to be 90% locally owned within three months, saying it damaged both free speech and the country's economic prospects.

In comments that drew a sharp rebuke from Fiji's Attorney-General Aiyaz Sayed-Khaiyum, Smith said the foreign ownership cap could deter investment in Fiji.

"That will have very substantial and serious deleterious effects on Fiji's economy and adversely affect the prosperity of their people," Smith told Australian Broadcasting Corp.

He described the action by Fiji Prime Minister Voreqe Bainimarama as regrettable and said his regime "continues to take Fiji backwards."

Since Bainimarama came to power in a bloodless military coup in 2006 he has cracked down on press freedoms, censoring reports and expelling foreign reporters and media executives, as well as suspending the constitution and pushing back the deadline for promised elections to 2014.

Fiji's economy, heavily reliant on sugar exports and tourism, has experienced sluggish growth in recent years due to political tensions and lack of progress implementing economic reforms, according to a report released in December by the International Monetary Fund.

The report predicts a fall in foreign direct investment in Fiji to an estimated US$264 million in 2010 from US$415 million in 2006

Sayed-Khaiyum said Smith's remarks were inaccurate and Bainimarama's government had worked to liberalize the economy to make Fiji more attractive to investors.

"The people who know Fiji, the people who are investors or would-be investors in Fiji, know that the issue of the media is very, very separate to the private sector investment that takes place in other sectors," he told Sky News Australia. "To draw some type of correlation is completely misplaced."

News Corp.'s (NWS) Australian subsidiary News Ltd.(NWS.AU), which says it will have to dispose of its only Fijian newspaper The Fiji Times under the decree, has described the move as a blow to the country's fragile economy.

"This is an outrageous precedent that will make foreign investors in other industries very nervous about their involvement and support there," News Ltd. Chief Executive John Hartigan said in a statement Monday.

News Corp. owns Dow Jones & Co., publisher of this newswire and The Wall Street Journal.

The Fiji Times is the largest newspaper in the country by circulation and has long had a tense relationship with the Bainimarama regime. News Ltd. said Monday that reporters at the newspaper had faced physical intimidation from the military-led regime and two managing directors have been deported in the past two years.

Sayed-Khaiyum said Fiji wanted to ensure its media wasn't run by foreigners who had no interest in the country's future.

"The media organization needs to have a stake within the country itself," he said. "They need to be pro the country, I'm not saying pro-government, but pro the country."

New Zealand Prime Minister John Key said the way Fiji had set about controlling the media was heavy handed.

"We want to see democracy restored in Fiji because we want a full operating economic environment," he told reporters. "When you start banning media and telling organizations to sell their newspapers, to me it sounds like a step too far."

FEA seeks $1billion dollars

by Elenoa Baselala

Fiji Times - Wednesday, June 16, 2010

THE Fiji Electricity Authority needs more than $1.1billion to "strengthen" its existing transmissions and invest in future transmission networks.

Chief executive Hasmukh Patel said this was essential in order to transport electricity from the new sources of power generation to customers, and to successfully meet the ever-increasing demand for power.

He said last week that a realistic tariff based on the cost of production would enable FEA to do this.

"The power transmission and distribution networks that need to be strengthened or constructed have been identified and preliminary works have commenced," he said.

The power provider needs $375million for its capital expenditure on generation, $210m for the Independent Power Producers (IPP) and $520m for FEA transmission, distribution and retail.

"FEA plans to fund some of these schemes and expects the private sector and independent power producers to fund the remaining mainly power generation projects," Mr Patel said.

The FEA already has government guaranteed debts worth $400m, which was confirmed by Public Enterprises head Aiyaz Sayed-Khaiyum at the Fiji Institute of Accountants Congress last week.

At the same meeting, Reserve Bank of Fiji governor Sada Reddy voiced his concerns on the State's liabilities, particularly in bailing out some of the statutory companies whose debts the State had guaranteed.

In particular, Mr Reddy gave the example of the Housing Authority where close to $40m worth of debts were transferred to equity as the organisation could not service its debts.

Mr Patel said the FEA could not further increase its debt levels to fund the identified projects as existing cash inflow was insufficient to enable funding for these projects.

But if it does not do anything, the possible scenarios would be inability to meet increasing demand of electricity, high fuel bills due to reliance on diesel generation, power rationing and its inability to service its debts could result in the immediate repayment of the loans and exposing the government as the guarantor.

While tariff realignment was approved by the Commerce Commission two weeks ago, Mr Patel recommends a detailed tariff study to establish the realistic tariff levels that would enable the FEA to implement its development program, facilitate the entry of IPPs, ensure long-term financial sustainability and achieve financial returns.

Get Bauxite mine running: Illegal Fiji PM

Fiji Broadcasting Corporation - Thursday, June 10, 2010

Stakeholders involved in the proposed Bauxite mine initiative in Bua have been urged to speed up negotiations and get the mine up and running. 

Prime Minister Commodore Voreqe Bainimarama, at a visit to the bauxite mine area today, also urged landowners to go into a joint venture with the mining company so they can reap the benefits.

FBC News Roland Koroi with this report from Bua:

“Prime Minister Commodore Voreqe Bainimarama told landowners at Nawailevu that the main reason he is pushing for the opening of the bauxite mine was so that they could benefit. 

Bainimarama told those gathered at the proposed mining site that for far too long landowners of this country were not taken seriously and were not getting what they rightfully deserve in as far as far as their concerned. 

The Prime Minster was briefed by experts at the site before being taken on a short tour of the Naiviqiri Bay. The Naiviqiri bau is currently being looked at as the site for a wharf – for the loading of bauxite. Naiviqiri is about 5 minutes out of the mining site and it is also here that a quarry will be built to contribute towards the betterment of the road which is now just a track through reed patches on soapstone and red mud. 

It was here that Bainimarama told the Permanent Secretary for Lands Colonel Neumi Leweni that he wants work to begin as soon as possible. 

He has also advised NLTB representatives present at the site to speed up the process of sorting the land leases out and he has made it clear that he does not want anybody or anything to prevent or even delay the process of getting this project off the ground.”

Permanent Secretary for Lands Colonel Neumi Leweni told FBC News that outstanding issues with the mine will be sorted out soon.

“The Prime Minister has been briefed by the Company and mineral resources officers and directed that we discuss all the issues with NLTB on Tuesday to sort out all the issues that needs to be sorted out and the green light will be given.”

Fiji Inflation hits 9.4% in May: Bureau

Fiji Broadcasting Corporation - June 04, 2010 

Fiji’s average annual rate of inflation stood at 9.4 percent in May 2010, compared to the same month in 2009, the Bureau of Statistics said in figures released this week.

The Consumer Price Index (CPI) which covers price changes in urban areas (Suva, Lami, Nausori, Lautoka, Nadi, Ba and Labasa], has weights derived from the Household, Income and Expenditure Survey of 2002/2003.

The average CPI for the 12 months to May 2010 stood at 6.6 percent compared with the average for the 12 months to May 2009.

The Bureau said the CPI for the month of May 2010 registered an increase of 0.1 percent over
April 2010 (126.4) and stands at 126.5.

In price changes recorded over the previous month, food prices dropped 0.6 percent with lower prices recorded for cereals, fresh fish, fresh fruits, mineral water, yaqona, fats and oils, tea, milo, ovaltine, top dressings, confectionery and market items such as imported carrot, okra, egg plant, rourou, pumpkin, onion, potato, dalo, cassava and blue peas.

The transport category recorded an increase of 1.9 percent with higher prices recorded for new vehicles, petrol, diesel, new tyres and spare parts.

Alcoholic drinks and tobacco saw a drop of 0.1 percent with lower prices recorded for cigarettes.

The Bureau said the housing and clothing and footwear categories recorded some changes but these were “balanced out”.

Momi properties up for mortgagee sale

Fiji Live News - 02 June 2010

Abandoned Bure at Momi Bay Resort

The Fiji National Provident Fund is not the only entity to incur losses due to the collapse of the multimillion dollar Momi Bay Resort project as the Unit Trust of Fiji is now making efforts to recover its $12.5 million invested in the project.

The Unit Trust of Fiji has put up over 300 acres of freehold land on the site for mortgagee sale which was to be stage two and three of the development project.

Unit Trust with the Banaban Trust invested in stages two and three of the development at Momi, which would have included the construction of the Ritz Carlton Resort, the expansion of the golf course and residential lots.

Since the project hit financial problems, Unit Trust was directed by the Capital Markets Development Authority to initiate steps to recover the Momi loan which was not being serviced.

Now, Unit Trust has brought in real estate agents, Bayleys to sell off the property through a mortgagee sale.

Bayleys Director Philip Toogood said the final price of sale for the property will be determined by the market.

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The Momi Bay Development project was to have cost around $225m and the Fiji National Provident Fund invested in the first stage of the development investing around $80 million.

An earlier attempt by the FNPF to auction the property fell short of the recovery amount with the highest bid being only $44 million.

The FNPF has since decided to cut its losses and has written off a total $55 million from the Momi Bay Resort project.

FEA in Danger of Insolvency: Reddy

Fiji Live News - June 02, 2010 

Fiji’s Commerce Commission says the Fiji Electricity Authority (FEA) could become insolvent if tariff rates are not above the unit cost of generating electricity.

Announcing the realignment of electricity tariff rates yesterday, commission chairman Dr Mahendra Reddy said the position of FEA at this stage was quite a worrying factual reality.

“The implications from this scenario on Fiji at the micro and macro level are numerous as the consequences of such a scenario will be disastrous,” he said.

Reddy indicated that rising fuel costs and the increasing use of diesel generators to produce electricity will also severely impact Fiji’s foreign reserve position.

“Power shutdowns and rationing will affect the commercial and industrial sector and thus economic growth in Fiji,” he added.

Reddy said after receiving a submission by FEA to implement an average 8.82 cents per unit tariff increase, the commission proceeded to examine the submission on its own merit.

According to the commission’s analysis, Fiji’s electricity tariff rates are much lower than comparator economies such as American Samoa, Kiribati, Palau, PNG, Tuvalu, Tonga, New Zealand and Australia.

“The commission noted that the current tariff rates do not reflect the scarcity of the single most important input, water, that it utilised in electricity production,” he stated.

He also indicated that FEA’s effort to encourage conservation of electricity by users has not led to significant gains on electricity savings.

“The unproductive and luxury usage of electricity continues to take place in the domestic, commercial, institutions and church group and the street light user groups.”

Reddy said FEA’s heavy borrowings to build a new hydro dam and power plant at Nadarivatu in the interior of Viti Levu was taken into consideration.

The new tariff rate alignment will see high end domestic users paying 8.82 cents more while the commercial sector will have to pay between 2.2 cents to 11.8 cents more depending on their usage. 

Households that consume 130 kWh monthly will be paying 16.4 percent less.

The decision is phase one of the tariff alignment and the Commerce Commission has asked FEA to provide detailed information to undertake phase two of the alignment, expected to take place next year.

HA to meet defaulting owners

Fiji Live News - May 24, 2010 

The Housing Authority of Fiji has embarked on an initiative to provide defaulting property owners with a final chance to retain their homes.

The authority last month met with 27 defaulting property owners in the central and western divisions to restructure their repayments and identify solutions on arrears.

They plan to meet with more than 150 other customers.

Housing Authority spokeswoman Shirley Tagi said their primary objective is to help the homeowner work out an arrangement to avoid foreclosure and allow the homeowner to stay in his or her home.

“We are willing to listen and find mutually acceptable solutions within reasonable boundaries as long as our customers’ financial situation is well-substantiated,” she said.

Tagi said they will be contacting their default customers on a case to case basis over the next few weeks to identify effective solutions based on genuine need.

“This ensures beneficial outcomes for both parties and prevents anyone from becoming a chronic defaulter, or worse becoming homeless,” she added.

This will be done before homes are placed on mortgagee sale or put up for auction.

Tagi said the authority could not afford to sustain its services if non-performing loans kept escalating.

“We are now calling on default customers to meet with us and discuss the options before it is too late.”

Meetings are scheduled for customers in Suva for May 25, 27 and 29 and in Lautoka from June 3 to 5.

Fiji Inflation Risk

by Shalveen Chand

Fiji Times - Monday, May 24, 2010

INCREASED liquidity in Fiji's banking system poses risks of inflation and loss of competitiveness, while high State debt and contingent liabilities, together with 70 per cent of GDP raise concerns about fiscal sustainability, says the International Monetary Fund.

The IMF, in its situation report released last week, said economic growth in Fiji of 2 per cent was likely in 2010, driven by a rebound in tourism, the global recovery, and rebuilding after the floods.

Fiji, however, faces considerable downside risks.

The growth outlook remains highly uncertain. The IMF cited volatility of commodity prices, the risk of natural disasters and the complex structural reform agenda.

The IMF has recommended tighter fiscal policy to safeguard macroeconomic stability and ensure sustainability. A reduction in the budget deficit to about 2 per cent of GDP in 2010 has been suggested. This excludes the cost of civil service reform with further consolidation over the medium-term.

Fiji agreed on the need for medium-term consolidation, but at a gradual pace.

The 2010 budget targets a small increase in the deficit to 3.5 per cent of GDP, with consolidation planned for 2011 and beyond.

The IMF also noted that the public enterprises were a source of significant fiscal risk and to eliminate losses and encourage private investment in these areas, tariffs for all goods and services provided by public enterprises should be raised to full cost recovery levels.

The report said the Fiji Electricity Authority's tariffs, among the lowest in the region, should be raised to reflect the cost of imported fuel and adjusted over time in line with changes in import costs.

Tariff adjustments should be accompanied by well-targeted transfers to protect the poor.

IMF said that a more flexible exchange rate would help absorb external shocks and protect Fiji's reserve position.

The authorities are considering raising tariffs, strengthening oversight of public enterprises, and moving regulatory functions to an independent entity to improve governance.

In a meeting held between IMF and Fiji, it has been agreed that monetary policy should be tightened to ensure inflation returns to low levels and protect foreign exchange reserves.

The Reserve Bank of Fiji (RBF) recently increased banks' required reserves and removed ceilings on banks' lending rates and spreads. The RBF is considering further steps to tighten liquidity, but did not see the need for a substantial increase in interest rates given the fragile economic outlook.

The authorities are evaluating the possibility of a more flexible exchange rate arrangement. IMF said that a more flexible exchange rate would help absorb external shocks and protect Fiji's reserve position.