But Bainimarama still on charter course

Dionisia Tabureguci
As Fiji’s interim government tries to push through a contentious new formula of national progress in its proposed People’s Charter for Change, Peace and Progress, the country’s economic path through its thicket of difficulties has met with a new challengeŃstagflation.

“We are caught in what economists term as ‘stagflation’, where the Fiji economy has declined but inflation is rising,” said RBF governor Savenaca Narube in an official speech in February to open a new branch in Fiji of Papua New Guinea’s biggest bankŃBank South Pacific.

“It is not a good place to be in.”

While Narube expects the condition to be temporary, he admitted it was tricky to formulate policies in such an environment characterised by a stressed foreign exchange reserves as prices of food and oil continue to rise and domestic export output still below par.

A review of the monetary policy package was necessary, he added, to “take into account this difficult balancing act”.

RBF’s latest monthly data when this edition went to press was released in March and saw inflation at 7.6 percent in February, the highest since 1999, it said, and up from the 7.4 percent recorded for January.

Local consumer advocates believe Fiji’s inflation figure, derived using a basket of goods and services closely linked to consumer spending, is far too low as its components have not been updated for over a decade. But even the February figure has had the RBF worried  as the country exited last year with a yearly inflation average of just 4.3 percent and the foreseeable future is peppered with certainties that prices will continue to rise.

Key cog: Like its Pacific neighbours, Fiji heavily relies on imports, a bulk of which is mineral fuels. Almost half of that is in the form of aviation turbine fuels used by its airline industry, a key cog in the tourism industry, which currently is the country’s economic mainstay.

Fiji also imports most food products including high-end vegetables, dairy and meat for its tourism industry, as well as wheat and rice for its now largely flour and rice consuming population.

Fiji is not a wheat grower and is not self-sufficient in rice and dairy products.

In recent times, its poor have been reeling in a series of price hikes in these basic food items as well as in public transport, a direct result of global market forces.

Impacts of a recent tropical cyclone have also added to the crunch and are likely to deflate earlier growth forecast of 2.2 percent. 

RBF’s February review also revealed a prevailing weak investment condition as investment credit and import of investment goods slowed, although this was contrasted by a 30 percent increase in the number of job advertisements.

The central bank is unsure whether this was due to business optimism or emigration of skilled workers.

But this stagflation is hitting a Fiji economy that has been struggling over the years to diversify its export base.

For its part, the country’s ruling administration hasŃsince usurping power in December 2006 from an elected governmentŃbeen engaged in an intense drive to re-engineer a domestic economy that it sees is suffering less from external shocks and more from under-utilised and under-explored natural resources, neglected, it believes, through years of self-serving and divisive racial politics.

Among the interim government’s relief prescription doses to keep the shaky economy on an even keel are an import substitution programme, the realignment of the national development bank to position financing back into resource-based sectors, and the setting up of a Committee on Better Utilisation of Land within the Native Land Trust Board, guardian of some 80 percent of Fiji’s land that belongs to the indigenous population and remains largely unused. 

These are happenings against a background of heavily polarised political sentiments over the legitimacy of the interim government’s existence and its self-mandated programmes, with calls being made daily to return the country to democratic rule in order to ease what has been perceived by some as greatly difficult economic times. 

The Bainimarama-led regime, however, has firmly resisted these calls and is currently pushing for the acceptance of a proposed People’s Charter for Change, Peace and Progress before it returns Fiji to the polls. 

Handled by a National Council for Building a Better Fiji, which Bainimarama co-chairs with the head of the Roman Catholic Church Archbishop Petero Mataca, the charter’s architecture will largely depend on a State of Nation and Economy (SNE) report to result from an independent review of the nation that will soon get underway.

The interim government wants the charter and its list of commitments to complement the country’s constitution and guide the policy direction of future governments of Fiji.

The intention, however, has been snubbed by some sections of the Fiji’s community who think this is a work that should be carried out by an elected government.