Fiji Reserve Bank imposes credit controls
The political and financial nightmare facing Australian financial institutions in their long-time captive market of Fiji is getting worse by the day.
They look to have little choice but to co-operate with harsh new regulations imposed on them by the Fiji Reserve Bank on Wednesday.
The Reserve said weighted average lending rates must return to the level they were at as at 31 December 2008 within three months. Interest rate spreads must be reduced to four per cent or below by 31 December 2009 and micro-finance service centres must be established in all branches by January 2010.
ANZ and Westpac dominate financial services in Fiji. Australian insurance companies with a presence in Fiji include QBE, Fiji Care, AON, Marsh and Tower.
A spokesman for ANZ said the bank would implement the new exchange controls. "These controls are similar to those implemented in December 2006 and are designed to protect foreign reserves."
He said: "All ANZ operations and branches in Fiji remain open for business as normal. We are fully committed to supporting our business, staff and customers in Fiji and across the Pacific."
Fiji's official foreign reserves at the end of February were FJ$674 million, equivalent to around 2.7 months of goods' imports, according to a Lowy Institute report released yesterday.
Jenny Hayward Jones, Program Director of the Myer Foundation Melanesia Program at the Lowy Institute said the new restrictions on commercial banking in Fiji were made in the best interest of the Fiji economy.
Hayward said: "They don't have a lot of choice, they have to make some tough decisions and while the decisions they have made may not have been the best ones they have to stabilise the situation and this is a usual means of doing that.
"In times of extreme crisis it is not unusual for a developing country to do this kind of thing."
As many as half of Fiji's 52,000 public service jobs are potentially at risk according to the Lowy report, while most tourist resorts are currently running at a loss. Floods in January 2009 are estimated to have caused FJ$160 million in damage.
Hayward Jones says that the Australian response to the Fiji crisis must differentiate between a strong and unambiguous political response and an economic response that takes into account "the rapidly deteriorating economic situation in Fiji and the impact of Fiji's economic collapse and the global financial crisis on the wider Pacific Islands' region."