{
  "title": "Public Information Notice: IMF Concludes Article IV Consultation with Fiji",
  "publication": "IMF News, October 1, 1998",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/53/pn9877",
  "canonical": "https://www.imf.org/en/news/articles/2015/09/28/04/53/pn9877",
  "overlayPath": "/en/news/articles/2015/09/28/04/53/pn9877/index.md",
  "summary": "Public Information Notices (PINs) form part of the IMF's efforts to promote transparency of the IMF's views and analysis of economic developments and policies.",
  "publishDate": "1998-10-01",
  "sections": [
    {
      "heading": "Background and recent developments",
      "content": "- On September 14, 1998 the Executive Board concluded the Article IV consultation with Fiji.1\n- The Fiji economy maintained macroeconomic stability but GDP growth averaged less than 2 percent per annum in 1991–97; low growth attributed mainly to sharply falling investment rates.\n- Gross domestic investment fell from an average of 25 percent during 1980–85 to less than 13 percent in recent years.\n- Private investment was less than 5 percent of GDP in the last five years and constrained by long-standing structural factors.\n- Economic activity weakened in 1997–98 due to weather-related shocks to sugar production, the Asian crisis, and policy uncertainty.\n- Real GDP declined by nearly 2 percent in 1997 and is expected to decline by 4 percent in 1998.\n- A severe drought in 1998 and reduced tourist arrivals compounded the downturn.\n- Key structural impediments include unresolved renewal of agricultural land leases and regulation of foreign direct investment.\n- Inflation fell in 1996–97 to the 3–4 percent range but the January 20, 1998 devaluation of the Fiji dollar by 20 percent increased price and wage pressures; end-period annual inflation in the first half of 1998 was nearly 5 percent and is expected to rise to 9–10 percent by end-year.\n- The fiscal position worsened during 1996–98, excluding privatization receipts and NBF restructuring costs underlying fiscal deficit rose to 6.5 percent in 1998 from 2.2 percent in 1997; privatization receipts roughly equal to 3 percent of GDP expected in 1998 from sales of two state-owned enterprises.\n- Government expenditures rose in 1996–98 reflecting higher wages, transfers, interest costs, and discretionary agriculture spending in 1998.\n- Progress on public enterprise reforms since 1997 enabling legislation: completed reform of radio broadcasting and partial divestiture of the national airline; reforms continuing in forestry, telecommunications, energy, civil aviation, water, and ports. Privatization receipts used to retire public debt. Government debt expected to be 45 percent of GDP at end-1998.\n- Monetary policy generally accommodative during 1996–98; RBF 91-day benchmark rate declined from over 3 percent in Q1 1996 to 2 percent in May 1998.\n- Broad money grew moderately in 1996 but contracted sharply in 1997 due to recession and fall in money multiplier from NBF restructuring.\n- Banking sector health improved after NBF restructuring and cessation of its commercial activities; authorities adopted tighter prudential requirements and strengthened supervision.\n- External debt low at 11 percent of GDP by end-1997; external debt-service was 2.9 percent of exports of goods and services; foreign exchange cover at 3.4 months of imports.\n- Current account recorded a surplus in 1996–97 but expected to be in deficit (2 percent of GDP) in 1998 as major export earnings decline.\n- Real effective exchange rate appreciated by almost 7 percent during 1996–97 and depreciated by nearly 14 percent in the year to June 1998, reflecting the January devaluation."
    },
    {
      "heading": "Executive Board assessment",
      "content": "- Directors commended Fiji’s historical record: low inflation rates, fiscal deficits, and external debt; attention to sustaining external position; RBF independence.\n- Directors viewed the fixed exchange rate regime as having provided macro stability and monetary policy effective in containing inflation; welcomed decision to announce currency basket weights by year-end.\n- Commended authorities’ flexibility in resolving the NBF crisis and enactment of the new constitution.\n- Directors expressed concern that the external environment had substantially worsened, fiscal balance had deteriorated sharply, and key structural reforms were long stalled.\n- Warned of real danger of a prolonged recession and stressed that decisive policy action could no longer be postponed.\n- Urged reversal of recent fiscal deterioration as soon as possible to preserve macro stability and prevent crowding out of private investment; highlighted importance of the 1999 budget in setting the pace for coming years.\n- Stressed need to curtail discretionary and unproductive spending and to reduce the public sector wage bill.\n- Noted significant real appreciation of the Fiji dollar during the 1990s, particularly versus Australia and New Zealand; supported the January 1998 devaluation as appropriate given appreciation and adverse terms-of-trade shock.\n- Emphasized that devaluation gains require containment of wage growth and further deregulation; recommended tightening monetary stance if the economy heats up, inflation picks up, or external reserves come under pressure.\n- Cautioned that the apparent absence of short-term external liabilities of the RBF and current adequate import cover could be threatened if policy uncertainty persisted.\n- Urged implementation of a credible structural reform agenda to temper adverse effects of global environment and weather shocks and to raise potential growth.\n  - Key reforms listed: renewal of land leases; removal of uncertainty regarding labor laws; reduction of the public sector via accelerated privatization; deregulation of the real and financial sectors.\n- Noted data gaps hinder policy formulation and Fund surveillance; urged regular compilation and publication of reliable data on terms of trade, exports and imports, and capital items in the balance of payments.\n- Encouraged conducting surveys on wages, unemployment, consumption, and investment; recommended construction of GDP deflators to estimate GDP in constant prices."
    },
    {
      "heading": "Key statistics and projections (1993–98)",
      "content": "- Real GDP (at constant factor cost): 1993: 2.6; 1994: 5.1; 1995: 2.5; 1996: 3.4; 1997: -1.8; 1998 Proj.: -3.7\n- Sugar production: 1993: 3.8; 1994: 17.0; 1995: -12.2; 1996: 0.0; 1997: -23.6; 1998 Proj.: -48.1\n- Tourist arrivals: 1993: 3.2; 1994: 10.9; 1995: -0.1; 1996: 6.6; 1997: 5.8; 1998 Proj.: -3.2\n- Consumer prices (period average): 1993: 5.3; 1994: 0.6; 1995: 2.2; 1996: 3.0; 1997: 6.5\n- Consumer prices (end-period): 1993: 2.9; 1994: 1.2; 1995: 2.4; 1996: 10.0; 1997: (not listed)\n- Gross national saving (percent of GDP): 1993: 11.2; 1994: 10.4; 1995: 12.2; 1996: 13.9; 1997: 12.6\n- Gross domestic investment (percent of GDP): 1993: 15.8; 1994: 13.1; 1995: 11.0; 1996: 12.4; 1997: 12.0\n- Foreign saving (current account deficit, percent of GDP): 1993: 4.6; 1994: 3.5; 1995: 0.9; 1996: -2.9; 1997: -0.2; 1998 Proj.: 2.0\n- Central government revenue and grants (percent of GDP): 1993: 25.9; 1994: 26.1; 1995: 25.7; 1996: 25.1; 1997: 26.5; 1998 Proj.: 31.1 (Of which: Privatization 3.1)\n- Total expenditure (percent of GDP): 1993: 29.2; 1994: 27.4; 1995: 30.0; 1996: 33.0; 1997: 34.5 (Of which: NBF restructuring 4.3)\n- Overall balance1 (percent of GDP): 1993: -3.3; 1994: -1.3; 1995: -0.5; 1996: -1.5; 1997: -2.2; 1998 Proj.: -6.5\n- Domestic credit (percent change; end-period)2: 1993: 12.8; 1994: 4.4; 1995: 1.4; 1996: 4.2; 1997: -10.1; 1998 Data (May): -13.5\n- Of which: Private sector (percent change): 1993: 12.9; 1994: 8.7; 1995: 4.8; 1996: -13.0; 1997: -14.5\n- Broad money (M2) (percent change; end-period): 1993: 6.7; 1994: 2.7; 1995: -8.7; 1996: -4.0\n- 91-day annualized interest on RBF note: 1993: 2.3; 1994: 3.3; 1995: 2.8; 1996: 1.9\n- Current account balance (US$ mns.): 1993: -75; 1994: -63; 1995: -19; 1996: 61; 1997: 4; 1998 Proj.: -33\n- Capital account balance3 (US$ mns.): 1993: 13; 1994: 28; 1995: 72; 1996: -14; 1997: -7; 1998 Proj.: 1\n- Overall balance/deficit (-) (US$ mns.): 1993: -46; 1994: -11; 1995: 77; 1996: 70; 1997: -29; 1998 Proj.: -13\n- Gross official reserves (US$ mns.; end-): 1993: 270; 1994: 273; 1995: 349; 1996: 427; 1997: 360; 1998: 3574 (June 16, 1998)\n- Gross official reserves (in months of imports): 1993: 4.1; 1994: 3.9\n- External debt (US$ mns.; end-period): 1993: 292; 1994: 283; 1995: 269; 1996: 256; 1997: 227; 1998 Proj.: 205\n- External debt (In percent of GDP): 1993: 17.9; 1994: 15.5; 1995: 13.5; 1996: 12.1; 1997: 10.8; 1998 Proj.: 12.7\n- Debt service (US$ mns.): 1993: 63; 1994: 79; 1995: 52; 1996: 54; 1997: 34; 1998 Proj.: 30\n- Debt service (In percent of exports of goods and): 1993: 7.1; 1994: 4.7\n- Real effective rate (period average)6: 1993: 107.6; 1994: 107.1; 1995: 105.0; 1996: 106.9; 1997: 112.2; 1998 Proj.: 92.32\n- F$ per US$ (end-period): 1993: 1.54; 1994: 1.41; 1995: 1.43; 1996: 1.38; 1997: 1.55; 1998 Proj.: 2.084\n\nInternational Monetary Fund — Public Information Notice: IMF Concludes Article IV Consultation with Fiji (October 1, 1998)\n\n---\n\n\n References\n\n- Republic of Fiji and the IMF\n- Public Information Notices\n- Article IV\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/53/pn9877"
    }
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    "Published: October 1, 1998",
    "On September 14, 1998 the Executive Board concluded the Article IV consultation with Fiji.1",
    "The Fiji economy maintained macroeconomic stability but GDP growth averaged less than 2 percent per annum in 1991–97; low growth attributed mainly to sharply falling investment rates.",
    "Gross domestic investment fell from an average of 25 percent during 1980–85 to less than 13 percent in recent years.",
    "Private investment was less than 5 percent of GDP in the last five years and constrained by long-standing structural factors.",
    "Economic activity weakened in 1997–98 due to weather-related shocks to sugar production, the Asian crisis, and policy uncertainty.",
    "Real GDP declined by nearly 2 percent in 1997 and is expected to decline by 4 percent in 1998.",
    "A severe drought in 1998 and reduced tourist arrivals compounded the downturn.",
    "Key structural impediments include unresolved renewal of agricultural land leases and regulation of foreign direct investment.",
    "Inflation fell in 1996–97 to the 3–4 percent range but the January 20, 1998 devaluation of the Fiji dollar by 20 percent increased price and wage pressures; end-period annual inflation in the first half of 1998 was nearly 5 percent and is expected to rise to 9–10 percent by end-year.",
    "The fiscal position worsened during 1996–98, excluding privatization receipts and NBF restructuring costs underlying fiscal deficit rose to 6.5 percent in 1998 from 2.2 percent in 1997; privatization receipts roughly equal to 3 percent of GDP expected in 1998 from sales of two state-owned enterprises.",
    "Government expenditures rose in 1996–98 reflecting higher wages, transfers, interest costs, and discretionary agriculture spending in 1998.",
    "Progress on public enterprise reforms since 1997 enabling legislation: completed reform of radio broadcasting and partial divestiture of the national airline; reforms continuing in forestry, telecommunications, energy, civil aviation, water, and ports. Privatization receipts used to retire public debt. Government debt expected to be 45 percent of GDP at end-1998.",
    "Monetary policy generally accommodative during 1996–98; RBF 91-day benchmark rate declined from over 3 percent in Q1 1996 to 2 percent in May 1998.",
    "Broad money grew moderately in 1996 but contracted sharply in 1997 due to recession and fall in money multiplier from NBF restructuring.",
    "Banking sector health improved after NBF restructuring and cessation of its commercial activities; authorities adopted tighter prudential requirements and strengthened supervision.",
    "External debt low at 11 percent of GDP by end-1997; external debt-service was 2.9 percent of exports of goods and services; foreign exchange cover at 3.4 months of imports.",
    "Current account recorded a surplus in 1996–97 but expected to be in deficit (2 percent of GDP) in 1998 as major export earnings decline.",
    "Real effective exchange rate appreciated by almost 7 percent during 1996–97 and depreciated by nearly 14 percent in the year to June 1998, reflecting the January devaluation.",
    "Directors commended Fiji’s historical record: low inflation rates, fiscal deficits, and external debt; attention to sustaining external position; RBF independence.",
    "Directors viewed the fixed exchange rate regime as having provided macro stability and monetary policy effective in containing inflation; welcomed decision to announce currency basket weights by year-end.",
    "Commended authorities’ flexibility in resolving the NBF crisis and enactment of the new constitution.",
    "Directors expressed concern that the external environment had substantially worsened, fiscal balance had deteriorated sharply, and key structural reforms were long stalled.",
    "Warned of real danger of a prolonged recession and stressed that decisive policy action could no longer be postponed.",
    "Urged reversal of recent fiscal deterioration as soon as possible to preserve macro stability and prevent crowding out of private investment; highlighted importance of the 1999 budget in setting the pace for coming years.",
    "Stressed need to curtail discretionary and unproductive spending and to reduce the public sector wage bill.",
    "Noted significant real appreciation of the Fiji dollar during the 1990s, particularly versus Australia and New Zealand; supported the January 1998 devaluation as appropriate given appreciation and adverse terms-of-trade shock.",
    "Emphasized that devaluation gains require containment of wage growth and further deregulation; recommended tightening monetary stance if the economy heats up, inflation picks up, or external reserves come under pressure.",
    "Cautioned that the apparent absence of short-term external liabilities of the RBF and current adequate import cover could be threatened if policy uncertainty persisted.",
    "Urged implementation of a credible structural reform agenda to temper adverse effects of global environment and weather shocks and to raise potential growth.",
    "Noted data gaps hinder policy formulation and Fund surveillance; urged regular compilation and publication of reliable data on terms of trade, exports and imports, and capital items in the balance of payments.",
    "Encouraged conducting surveys on wages, unemployment, consumption, and investment; recommended construction of GDP deflators to estimate GDP in constant prices.",
    "Real GDP (at constant factor cost): 1993: 2.6; 1994: 5.1; 1995: 2.5; 1996: 3.4; 1997: -1.8; 1998 Proj.: -3.7",
    "Sugar production: 1993: 3.8; 1994: 17.0; 1995: -12.2; 1996: 0.0; 1997: -23.6; 1998 Proj.: -48.1",
    "Tourist arrivals: 1993: 3.2; 1994: 10.9; 1995: -0.1; 1996: 6.6; 1997: 5.8; 1998 Proj.: -3.2",
    "Consumer prices (period average): 1993: 5.3; 1994: 0.6; 1995: 2.2; 1996: 3.0; 1997: 6.5",
    "Consumer prices (end-period): 1993: 2.9; 1994: 1.2; 1995: 2.4; 1996: 10.0; 1997: (not listed)",
    "Gross national saving (percent of GDP): 1993: 11.2; 1994: 10.4; 1995: 12.2; 1996: 13.9; 1997: 12.6",
    "Gross domestic investment (percent of GDP): 1993: 15.8; 1994: 13.1; 1995: 11.0; 1996: 12.4; 1997: 12.0",
    "Foreign saving (current account deficit, percent of GDP): 1993: 4.6; 1994: 3.5; 1995: 0.9; 1996: -2.9; 1997: -0.2; 1998 Proj.: 2.0",
    "Central government revenue and grants (percent of GDP): 1993: 25.9; 1994: 26.1; 1995: 25.7; 1996: 25.1; 1997: 26.5; 1998 Proj.: 31.1 (Of which: Privatization 3.1)",
    "Total expenditure (percent of GDP): 1993: 29.2; 1994: 27.4; 1995: 30.0; 1996: 33.0; 1997: 34.5 (Of which: NBF restructuring 4.3)",
    "Overall balance1 (percent of GDP): 1993: -3.3; 1994: -1.3; 1995: -0.5; 1996: -1.5; 1997: -2.2; 1998 Proj.: -6.5",
    "Domestic credit (percent change; end-period)2: 1993: 12.8; 1994: 4.4; 1995: 1.4; 1996: 4.2; 1997: -10.1; 1998 Data (May): -13.5",
    "Of which: Private sector (percent change): 1993: 12.9; 1994: 8.7; 1995: 4.8; 1996: -13.0; 1997: -14.5",
    "Broad money (M2) (percent change; end-period): 1993: 6.7; 1994: 2.7; 1995: -8.7; 1996: -4.0",
    "91-day annualized interest on RBF note: 1993: 2.3; 1994: 3.3; 1995: 2.8; 1996: 1.9",
    "Current account balance (US$ mns.): 1993: -75; 1994: -63; 1995: -19; 1996: 61; 1997: 4; 1998 Proj.: -33",
    "Capital account balance3 (US$ mns.): 1993: 13; 1994: 28; 1995: 72; 1996: -14; 1997: -7; 1998 Proj.: 1",
    "Overall balance/deficit (-) (US$ mns.): 1993: -46; 1994: -11; 1995: 77; 1996: 70; 1997: -29; 1998 Proj.: -13",
    "Gross official reserves (US$ mns.; end-): 1993: 270; 1994: 273; 1995: 349; 1996: 427; 1997: 360; 1998: 3574 (June 16, 1998)",
    "Gross official reserves (in months of imports): 1993: 4.1; 1994: 3.9",
    "External debt (US$ mns.; end-period): 1993: 292; 1994: 283; 1995: 269; 1996: 256; 1997: 227; 1998 Proj.: 205",
    "External debt (In percent of GDP): 1993: 17.9; 1994: 15.5; 1995: 13.5; 1996: 12.1; 1997: 10.8; 1998 Proj.: 12.7",
    "Debt service (US$ mns.): 1993: 63; 1994: 79; 1995: 52; 1996: 54; 1997: 34; 1998 Proj.: 30",
    "Debt service (In percent of exports of goods and): 1993: 7.1; 1994: 4.7",
    "Real effective rate (period average)6: 1993: 107.6; 1994: 107.1; 1995: 105.0; 1996: 106.9; 1997: 112.2; 1998 Proj.: 92.32",
    "F$ per US$ (end-period): 1993: 1.54; 1994: 1.41; 1995: 1.43; 1996: 1.38; 1997: 1.55; 1998 Proj.: 2.084",
    "[Republic of Fiji and the IMF](http://www.imf.org/external/country/FJI/index.htm)",
    "[Public Information Notices](https://www.imf.org/en/news/searchnews)",
    "[Article IV](https://www.imf.org/external/pubs/ft/aa/aa04.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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