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Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 01 Annual Report R E S E R V E B A N K O F F I J I AUGUST 2019 - JULY 2020 REPORT PARLIAMENTARY PAPER NO.
55 OF 2020 Our Vision Our Mission Leading Fiji to Economic Success • Conduct monetary policy to foster sustainable and inclusive economic growth • Promote an internationally reputable financial system • Play an influential role in the development of the economy • Provide proactive and sound advice to Government • Disseminate timely and quality information to stakeholders • Enhance operational efficiency through innovation and risk management and • Develop, empower and retain a professional team TABLE OF CONTENTS 22 Conduct Monetary Policy to Foster Sustainable and Inclusive Economic Growth 27 43 Promote an Internationally Reputable Financial System Play an Influential Role in the Development of the Economy 49 Provide Proactive and Sound Advice to Government 23 Monetary Policy 28 Financial System 44 Finance Facilities 50 Policy Coordination Formulation 24 Monetary Policy Regulation and Supervision available at the RBF 50 Registry and Banking 45 Secondary and Retail Services Implementation 35 Capital Markets Industry Bond Market 38 Currency 45 Financial System 41 Payment and Settlement Development Systems 45 Financial Inclusion 51 RBF Media Note 48 RBF in the Community 02 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 1 Our Values The principal purposes of the Reserve Bank shall be • Professionalism in the execution of our • To regulate the issue of currency and the supply, availability duties • Respect for each other • Integrity in our dealings • Dynamism in our operations and • Excellence in everything and international exchange of money • To promote monetary stability • To promote a sound financial structure • To foster credit and exchange conditions conducive to the orderly and balanced economic development of the country • To regulate the insurance industry and • To regulate the capital markets and the securities industry Section 4, Reserve Bank of Fiji Act (1983) 2 Letter to the Minister 3 Our Functions 4 Governor’s Foreword 7 Organisational Structure 9 RBF’s Response Measures to
 COVID-19 10 Board of Directors 11 Executive Management 12 Corporate Governance 16 2019-20 At A Glance 17 Economic Overview 52 Disseminate Timely and Quality Information to Stakeholders 56 Enhance Operational Efficiency through Innovation and Risk Management 60 63 Develop, Empower and Retain a Professional Team Selected Updates August 2019 to July 2020 53 Financial Performance 57 Information Technology 61 Staffing, Management 64 The Year Ahead 53 Operating Profit and 58 Risk Management Remuneration, 66 Financial Statements Payment to Government 53 Publications and Press Releases 54 Records Management, Property Management and Security, Domestic Relations 55 International Relations Staff Development, Employment Relations – for the year ended 31 July 2020 62 Labour Management 109 Five-Year Historical Consultative Information Cooperation, Quality 110 Fiji: Key Economic Management Teams, Attachments, Internship, Occupational Health and Financial Indicators 111 Abbreviations and Safety, Long Service Recognition Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 1 LETTER TO THE MINISTER LETTER TO THE MINISTER LETTER TO THE MINISTER RESERVE BANK OF FIJI RESERVE BANK OF FIJI Governor Governor Our Reference: D20/4727 Our Reference: D20/4727 Your Reference: Your Reference: Honourable Aiyaz Sayed-Khaiyum Minister for Economy Honourable Aiyaz Sayed-Khaiyum Ministry of Economy Minister for Economy Ro Lalabalavu House Ministry of Economy Victoria Parade Ro Lalabalavu House SUVA Victoria Parade SUVA 25 September 2020 25 September 2020 Dear Sir Dear Sir Re: Re: Reserve Bank of Fiji Annual Report and Accounts for the financial year ended 31 July 2020 Reserve Bank of Fiji Annual Report and Accounts for the financial year ended 31 July 2020 In terms of section 56(1) of the Reserve Bank of Fiji Act 1983 and on behalf of the Reserve Bank of Fiji, I submit the following: - In terms of section 56(1) of the Reserve Bank of Fiji Act 1983 and on behalf of the Reserve Bank of Fiji, I
 submit the following: - (i) (i) (ii) (ii) A copy of the RBF Annual Accounts for the year ended 31 July 2020 certified by the Auditors and A copy of the RBF Annual Accounts for the year ended 31 July 2020 certified by the Auditors and A report on the RBF’s Operations for the 2019-2020 financial year.
Yours faithfully Yours faithfully Ariff Ali Governor Ariff Ali Governor _________________________________________________________________________________________________________________________ Private Mail Bag, Suva, Fiji Tel: (679) 331 3611 Fax: (679) 330 4363 Email: info@rbf.gov.fj _________________________________________________________________________________________________________________________ Private Mail Bag, Suva, Fiji Tel: (679) 331 3611 Fax: (679) 330 4363 Email: info@rbf.gov.fj Website: www.rbf.gov.fj Website: www.rbf.gov.fj 2 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 3 OUR FUNCTIONS The Reserve Bank of Fiji (RBF)1 is the central bank of the Republic of Fiji established in 1984 through an Act of Parliament - the RBF Act of 1983.
Article 153(2) of the 2013 Constitution states that “in pursuing its primary objects, the Reserve Bank of Fiji must perform its functions independently and without fear, favour or prejudice but there must be regular consultation between the Reserve Bank of Fiji and the Minister responsible for finance2.” Monetary Stability Under section 4(b) of the RBF Act (1983), the Bank is required to promote monetary stability through low and stable inflation and to maintain an adequate level of foreign reserves.
The Bank undertakes this responsibility through the formulation and implementation of monetary policy.

Policy tools include the Overnight Policy Rate (OPR), Open Market Operations (OMO), Statutory Reserve Deposits (SRD), including other direct and indirect tools which have been used at various times.

In managing the country’s foreign reserves, the Reserve Bank also administers exchange control policies under the Exchange Control Act (1952).
Financial Stability Under section 4(c) of the RBF Act (1983), the Bank is mandated to promote a sound financial structure.

In undertaking this function, the Bank licenses and supervises banking, insurance, superannuation and capital markets institutions, as well as foreign exchange dealers.

The supervised institutions must comply with relevant legislative requirements, as well as prudential policies and guidelines issued by the Reserve Bank.
As part of its mandate to ensure financial stability, the Bank identifies and takes steps to mitigate and counter growing risks in individual institutions and the financial system.

In this regard, macroprudential supervision has been established to ensure systemic stability.

The Bank’s supervisory role also includes activities to combat money laundering and terrorist financing as mandated under the Financial Transactions Reporting (FTR) Act (2004) and the FTR Regulations (2007).
The Reserve Bank acts as banker for Government as well as commercial banks and provides payment and settlement services through FIJICLEAR.

This is administered under the Payment and Settlement Systems Oversight Regulations (2004).
The authority for the Bank to supervise the capital markets industry is provided under the Companies Act (2015), which also covers the administration of takeovers; regulation of securities exchanges & central depository; regulation of securities and industry licences; transactions involving listed securities; capital raising; debentures; managed investment schemes, insider trading; offences and investigations and information gathering.
The Fair Reporting of Credit Act (2016) places specific responsibilities with the Reserve Bank to register, license and regulate credit reporting agencies, credit information providers and credit report recipients as well as to maintain proper standards of conduct and acceptable credit reporting practices.

Currency Management Under section 22(1) of the RBF Act, the Bank has the sole right to issue currency in Fiji.
The Reserve Bank is the sole entity responsible for the printing of notes, minting of coins and the destruction and disposal of used and unserviceable notes and coins.

The Reserve Bank also determines the denominational structure, design, content, material and composition of Fiji’s currency, subject to the approval of the Minister for Economy.
Financial System Development The Bank also undertakes development work for the financial industry which includes driving financial inclusion activities, capital market developments, improving micro, small and medium enterprise (MSME) access to finance and overseeing the complaints management process in all supervised entities.

Under the Personal Property Securities Regulations 2019, the Reserve Bank is designated as the Registrar of the Fiji Personal Property Securities Registry (FPPSR).
Other The Bank provides banking, registry and foreign exchange services to Government and is a lender of last resort to the commercial banks.

Policy advice is offered to the Government through participation in various committees and on request.

Reserve Bank of Fiji Annual Report 1 Hereinafter, the Reserve Bank of Fiji, RBF or the Bank may be used interchangeably when making reference to the institution.

2 This position is now referred to as the Minister for Economy.
Reserve Bank of Fiji Annual Report 3 GOVERNOR'S FOREWORD The 2019-20 financial year (FY) was a profound one for the Reserve Bank of Fiji that not only brought with it new experiences and challenges to monetary policy formulation, but was also unparalleled in terms of the domestic impact of the COVID-19 pandemic.
The first half of the FY was marked by the synchronised global slowdown, triggered by the US-China trade tensions, whilst the second half was even more challenging with the breakout of the Coronavirus across the globe.

Many countries implemented containment measures through various restrictions such as lockdowns, social distancing and closure of borders, causing disruptions to travel, production, trade and the global economy on an unprecedented scale.
Consequently, the global economy is expected to shrink by 4.4 percent3 in 2020 – the sharpest contraction since the Great Depression of the 1930s.

While Fiji managed to avoid a large-scale outbreak of the coronavirus, our heavy reliance on tourism exacerbated its negative economic ramifications.

As the pandemic took hold, tourism activity dwindled and eventually collapsed, triggering a negative knock-on effect on other major sectors of the economy.
Following a 0.4 percent decline in 2019, the Fijian economy is forecast to further contract by a record 21.7 percent this year given the halt 3 October 2020 IMF World Economic Outlook (WEO).

4 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 5 in international visitor arrivals, suppressed foreign demand and associated fall in incomes for households, businesses and the Government.
In its efforts to maintain macroeconomic and financial stability, the Bank introduced several response measures during the FY.

As an initial response, the RBF on 18 March 2020, reduced its OPR by 25 basis points (bp) to stimulate demand by lowering the cost of borrowing and supporting consumption and investment.

The RBF also injected additional liquidity into the financial system through its quantitative easing measures.
Funding for the Import Substitution and Export Finance Facility (ISEFF) was increased by $100 million to $300 million.

Similarly, the allocation for the recalibrated and renamed Disaster Rehabilitation and Containment Facility (DRCF) was raised to $100 million from $40 million.

These facilities are targeted at assisting businesses to access concessional finance through their respective bankers during the crisis period.
External stability was a key consideration as it became clear that the crisis would be prolonged.

The RBF moved swiftly on this front by tightening exchange control measures to prevent capital flight and speculative activities.

Furthermore, the RBF invested $300 million in Government bonds between March and July 2020 to support Government revenue and ensure the continued functioning of Government operations.
Mindful that the persistence of the crisis will drastically reduce fiscal revenue, the statutory limit of the RBF’s exposure to Government and statutory corporations was raised from 30 percent to 50 percent of the average total revenue of the Government for the past three years.

Through these measures and other policy initiatives, the Bank’s twin monetary policy objectives of low inflation and an adequate level of foreign reserves remained intact during the FY.
In July 2020, inflation was -1.6 percent while foreign reserves stood at $2.1 billion, sufficient to cover 7.7 months of retained imports.

Supervision of licensed financial institutions (LFI) intensified due to the pandemic.

The Bank impressed upon supervised entities the importance of business continuity planning and issued supervisory guidance, reinforcing the need to ensure adequate risk management during the pandemic.
This included the review of Business Continuity Planning tests, controls for remote work in consideration of cybersecurity risk and infection control.

Commercial banks and credit institutions were also issued with supervisory guidance regarding the prudential treatment and reporting of relief measures provided to customers.
Following the launch of the RBF's new Strategic Plan in August 2019, the Bank's focus was on the progressive implementation of the strategic priorities for the next five years, which were aligned to annual work plans.

The inclusion of an additional mission – enhance operational efficiency through innovation and risk management – proved to be timely.

Innovation is now more relevant than ever to drive the Bank’s work processes.
The benefits of the Bank’s ongoing digitisation of work processes, and resilience against risk and cybersecurity threats, were quite evident during the lockdown, whereby 60 percent of the Bank’s employees worked from home and continued to deliver on essential services via remote access to the corporate network.
In its continued efforts to develop Fiji’s financial system, the Bank launched the FinTech Regulatory Sandbox Guideline in December 2019, a framework which aims to foster the responsible development of innovative solutions in Fiji’s financial sector.

This initiative provides a creative and safe space that facilitates controlled live tests of new financial products and services before commercial deployment.
Such financial technology continues to play a transformative role in broadening access to essential financial services.

Further collaborative efforts with the Pacific Islands Regional Initiative (PIRI) and the Alliance for Financial Inclusion (AFI) led to a consultative forum hosted by the RBF during the FY for key stakeholders towards the development of the world’s first Regional Regulatory Sandbox.
Despite the challenging global economic, financial and substantially low interest rate environment, the Reserve Bank reported a net profit of $30.1 million, slightly higher than the $28.9 million recorded in the preceding financial year.
A transfer of $31.8 million was made to Government, which accounts for $1.0 million transfer to the General Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 5 GOVERNOR'S FOREWORD (continued) Reserve Account and inclusive of $2.7 million being one-fifth of the Revaluation Reserve Account, as required under section 34(3) of the RBF Act.

The profit outturn was underpinned by a reduction in total operating cost which more-than offset the lower interest income.
The RBF remains committed to delivering its statutory responsibilities to all stakeholders, including the wider community and the environment, as part of its corporate social responsibility.

The RBF continues to actively engage the community, both at the local and national level.
A meaningful involvement of the Bank in this regard included creating awareness through its financial literacy programme in the iTaukei language by hosting the Noda i Lavo television programme which recorded its fourth season in 2019.

Looking ahead, global risks and policy uncertainties remain elevated.

The pandemic is a unique crisis that will undoubtedly have implications on the domestic economy in the next financial year and beyond.
While we have noted some improvements in the economy over the last couple of months, we are still a long way from pre-COVID levels.

Against this backdrop, the Reserve Bank will continue to vigilantly monitor economic and financial developments and align monetary policy accordingly.

The focus over the next few months is on supporting the domestic economy and preserving financial sector stability.
On a positive note, the Bank looks forward to celebrating Fiji’s 50th year of independence in October 2020 and will be unveiling some unique and specially designed currency.

The Reserve Bank maintained its collaborative efforts during the FY despite the challenging economic conditions.
This included meeting with key industry stakeholders, implementing policy initiatives, particularly in the area of providing relief during the pandemic through our response measures, disaster risk financing, inclusive insurance, payment systems reform, review of the Insurance Act and continued strengthening of research.
Finally, I extend my sincere appreciation to the Board of Directors, Management and external stakeholders for their continuous support and guidance throughout the FY and Team RBF for their dedication and commitment.

I assure all our stakeholders, especially all Fijians that the Board, Management and staff of the Reserve Bank will continue to uphold our values and strive diligently towards meeting our mandate in the coming financial year.
.......................................... Ariff Ali Governor and Chairman of the Board 6 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 7 ORGANISATIONAL STRUCTURE Currency and Corporate Services Currency, accounting, human resources, information technology, general services, records management, corporate projects, property management and security.
Economics Economic analysis and research, monetary and macroeconomic policy, publications, forecasting, financial and economic statistics.

Financial Institutions Financial system supervision, prudential supervision policies, licensing and examination of supervised institutions, including credit reporting agencies and capital markets supervision.
Board of Directors Governor and Chairman of the Board Deputy Governor Governor’s Office and Board Provide advice to the Governors on economic, financial and other Bank policies including staff contractual related matters, corporate communications, domestic and international liaison and board and Bank secretariat services.
Financial Markets Exchange rates, foreign reserves management, foreign exchange dealing, market monitoring, exchange control, export proceeds monitoring, open market operations, securities registry and liquidity forecasting.

Financial System Development Financial Inclusion, payment and settlements, financial system development, complaints and consumer protection, financial literacy and development policy.
Risk Management and Communications Risk management, business continuity, corporate communications and liaison, assurance, legal, middle office, library and strategic/corporate planning.
Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 7 8 Reserve Bank of Fiji Annual Report 8 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 9 RESERVE BANK OF FIJI’S RESPONSE MEASURES TO COVID-19 The Reserve Bank implemented the following response measures to boost the economy by supporting businesses and individuals and assist in the recovery from the effects of COVID-19.
Reduced the OPR by 25 basis points to 0.25 percent on March 18, 2020 to help stimulate demand by reducing the cost of borrowing and support consumption and investment.

The interest rate corridor was also lowered on both sides of the OPR.

Effectively, the interest rate at which commercial banks may borrow from the RBF under the Repurchase facility has fallen to 0.50 percent from 1.00 percent while the deposit rate at which banks would earn interest on deposits held at RBF, remains at zero percent.
Engaged in a number of quantitative easing measures, thereby pumping additional liquidity into the financial system.

The Natural Disaster Rehabilitation Facility was recalibrated to cover pandemics and renamed to DRCF with an increased allocation to $100 million.

This means that financial institutions could borrow from the RBF at interest rate of 1.0 percent and then on-lend to businesses which were affected by the COVID-19 pandemic at a maximum interest rate of 5.0 percent.
Approved an additional $100 million into the financial system through the ISEFF.

Under this facility, businesses involved in exports and import substitution could access finance from financial institutions at a maximum rate of 5.0 percent.

In line with its accomodative monetary policy stance and to support lower interest rates for businesses and consumers, the RBF invested $300 million in Government bonds between March and July 2020.
Given the projected fall in Government revenue, the RBF Act was amended to allow the exposure limit of the RBF to Government and statutory corporations to be increased from 30 percent to 50 percent of the average total revenue for the past three years.

Provided guidance on the prudential classification of loans on repayment moratoriums and the provisioning treatment of COVID-19 loans.
The RBF continuously monitors the FNPF in light of the COVID-19 assistance provided, in order to ensure the sustainability of the Fund and the adequacy of members’ funds for future needs.

Tightened exchange control policies as a way of curtailing sudden or large outflows in foreign reserves and protecting the balance of payments position.

Foreign reserves have remained adequate so far into the year, an objective that the Bank closely monitors.
By providing liquidity, the RBF aims to reinforce the bank lending channel to encourage commercial banks to maintain their lending to the real economy.

As a result of these actions, liquidity in the system remains at ample levels, totalling $765.2 million at the end of the financial year.
Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 9 BOARD OF DIRECTORS Makereta Konrote Ariff Ali Pradeep Patel Tevita Kuruvakadua Tony Whitton (OF) Top left to right: Makereta Konrote Permanent Secretary, Ministry of Economy (Ex-officio) Appointed to the Board on 11 January 2016.

Board Director of the Fiji National Provident Fund (FNPF) and Fiji Revenue and Customs Service (FRCS).

Member of RBF’s Board Audit and Risk Committee (BARC) and Member of the Macroeconomic Committee (MC).
Alternate Governor for Fiji at the World Bank and the Asian Infrastructure Investment Bank.

Ariff Ali Governor and Chairman of the Board Appointed as Governor with effect from 11 September 2017 for five years.

Alternate Governor for Fiji at the International Monetary Fund (IMF) and the Asian Development Bank (ADB).

Chairman of the Monetary Policy Committee.

Chairman of the MC.

Chairman of the Capital Markets Advisory and Development Taskforce (CMADT).
Chairman of the National Financial Inclusion Taskforce.

Chairman of the Secured Transactions Taskforce.

Chairman of the Government Tender Board.

Chairman of the Accident Compensation Commission Fiji.

Chairman of the Fiji Roads Authority.

Board Director of the FRCS.

Member of the Council of the Fiji Institute of Bankers and the National Anti-Money Laundering (AML) Council.
Bottom left to right: Pradeep Patel Director Tevita Kuruvakadua Director Tony Whitton (OF) Director Appointed to the Board on 9 June 2014.

Reappointed on 8 June 2020 for one year.

Chairman of the RBF’s BGC.

Member of the RBF’s BARC.

Chief Executive Officer of the iTaukei Land Trust Board.

Board Member of the Fiji Sugar Corporation Limited (FSC), Energy Fiji Limited (EFL) and Fiji Ports Terminal Limited.

Appointed to the Board on 9 June 2014.

Reappointed on 8 June 2020 for one year.


Chairman of the RBF’s BARC and Member of the RBF’s Board Governance Committee (BGC).

Senior Partner of BDO, Chartered Accountants.

Member of the Fiji Institute of Accountants (FIA), Certified Practising Accountants Australia and Australian Institute of Company Directors (AICD).

Member of the CMADT.

Former President of the FIA and have served on committees of the FIA, including the Standards Committee and Business & Government Committee.
Appointed to the Board on 3 March 2015 for three years.

Reappointed on 2 March 2018 for three years.

Member of the RBF’s BGC.

Managing Director of the Rosie Travel Group of Companies and Ahura Resorts.

Board Member of Fijian Holdings Limited and Chairman of Pacific Cement Limited.

Served as a Board Member of Tourism Fiji and Former President of the Society of Fiji Travel Associates.

Member of the AICD.

Chairman and Trustee of Cure Kids Fiji and the International School Nadi.
Trustee of the Koroipita Model Towns Charitable Trust.

In July 2019, Mr Whitton was awarded the Officer of the Order of Fiji (OF) by his Excellency the President of Fiji for his distinguished service of a high degree to Fiji and humanity.
10 Reserve Bank of Fiji Annual Report 10 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 11 EXECUTIVE MANAGEMENT Esala Masitabua Caroline Waqabaca Susan Kumar Vilimaina Dakai Petaia Tuimanu Poasa Werekoro Lanieta Rauqeuqe Subrina Hanif Top left to right: Esala Masitabua Deputy Governor Left to right: Petaia Tuimanu Chief Manager Economics Caroline Waqabaca Chief Manager Financial Markets Susan Kumar Chief Manager Currency and Corporate Services1 Vilimaina Dakai Chief Manager Financial Institutions Poasa Werekoro Chief Manager Financial System Development2 Lanieta Rauqeuqe Acting Chief Manager Risk Management and Communications3 Subrina Hanif Board Secretary 4 5 6 Lorraine Seeto Praneel Prasad Peni Kunatuba 1 Reverted to Chief Manager Currency and Corporate Services with effect from 1 April 2020.
Prior to this, she was rotated as Chief Manager Risk Management and Communications.

2 Confirmed as Chief Manager Financial System Development with effect from 9 January 2020.

3 Appointed as Acting Chief Manager Risk Management and Communications with effect from 1 April 2020.

Prior to this, she was Manager Financial Conditions.

4 Served as Chief Manager Governor's Office up to 31 December 2019.

5 Acting as Chief Manager Currency and Corporate Service with effect from 1 April to 30 September 2019.
6 Acting as Chief Manager Currency and Corporate Service with effect from 1 October to 31 March 2020.

Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 11 11 Reserve Bank of Fiji Annual Report CORPORATE GOVERNANCE The RBF is established as an independent institution under the RBF Act (1983) and is fully owned by the Government of Fiji.
The functions and duties of the Reserve Bank are specified in the RBF Act (1983), RBF Amendment Decree (2009), the Banking Act (1995), the Insurance Act (1998), the Exchange Control Act (1952), the FTR Act (2004), Payment and Settlement Systems Oversight Regulations (2004), the Fiji National Provident Fund Act (2011), the Companies Act (2015) and the Fair Reporting of Credit Act (2016).
Article 153 of the 2013 Constitution of the Republic of Fiji states as follows: (1) The RBF is the central bank of the State, whose primary objects are: - a) To protect the value of the currency in the interest of balanced and sustainable economic growth; b) To formulate monetary policy; c) To promote price stability; d) To issue currency; and e) To perform other functions conferred to it by written law.
(2) In pursuing its primary objects, the RBF must perform its functions independently and without fear, favour, or prejudice, but there must be regular consultation between the RBF and the Minister responsible for Economy.

(3) The powers and functions of the RBF are those customarily exercised and performed by central banks.
(4) The Governor of the Reserve Bank shall be appointed by the President on the advice of the Constitutional Offices Commission, following consultation with the Minister responsible for Economy.

(5) A written law must provide for the composition, powers, functions and operations of the RBF.

(6) The RBF must deliver quarterly and annual reports to Parliament and any other reports when required by law, or requested by resolution.
The RBF’s performance is documented in an Annual Report and tabled in Parliament every year.

Under section 56(1) of the RBF Act, the Annual Accounts and a Report of Operations of the Bank must be submitted to the Minister for Economy within three months after the end of the financial year.

Under the Insurance Act, the Insurance Annual Report is published annually on a calendar-year-basis and must be submitted to the Minister for Economy by 30 June of the following year.
The Vision of the Bank is “Leading Fiji to Economic Success” and is supported by the Mission statements and a set of Values.

The Governor The Governor serves as the Bank’s Chief Executive Officer and is responsible to the Board for the management of the Bank and the execution of its policies.

Mr Ariff Ali was appointed as the Governor of the Reserve Bank of Fiji with effect from 11 September 2017 for a term of five years.
He served as the Deputy Governor with effect from 27 May 2014 and was later appointed as acting Governor on 28 May 2017.

Board of Directors The Reserve Bank Board comprises the Governor, who serves as the Chairman, the Permanent Secretary for Economy, as an ex-officio member and five4 other non- executive members, a total of seven.

Appointments to the Board are made by the Minister for Economy, as stipulated in the RBF Act.
A Director may be appointed for a period not exceeding three years and is eligible for re-appointment.

Ms Makereta Konrote, Permanent Secretary for Economy, is an ex-officio member appointed on 11 January 2016.

Other Board Directors holding office as at 31 July 2020 were Mr Pradeep Patel, Mr Tevita Kuruvakadua and Mr Tony Whitton.

Board Meetings Under the RBF Act, the Board is required to meet at least ten times in a year.

Four Directors form a quorum for a meeting of the Board.
In the absence of the Governor, the Deputy Governor may participate in the Board meetings and is entitled to exercise a vote.

In addition, in the absence of Governor, another Director present shall be appointed by consensus to chair the Board meeting.

4 Currently, there are 2 vacant positions at the Board level.

12 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 13 Board meetings are usually held on the last Thursday of each month.
executives are also invited to these meetings, as required.

On appointment to the Board, each Director is required under the RBF Act to sign a declaration to maintain confidentiality in relation to the affairs of the Board and the Reserve Bank.

The Board met 11 times during the review period.

Attendance by members at meetings of the Board and Board Committees is shown in the table below.

Apart from the Deputy Governor, other members of Executive Management attend the Board meetings, as required.
Board Committees The RBF Board has two Committees - the Audit and Risk Committee and the Governance Committee, which comprise non-executive members.

Decisions of the Committees are submitted to the Board for ratification.

The Deputy Governor attends meetings of both the Committees on a regular basis as the chief representative of the Bank’s management.
Other senior Bank The Board Audit and Risk Committee monitors the adequacy of the audit function in the Bank and assists the Board in fulfilling the requirements of the RBF Act in relation to the Bank’s accounting and reporting practices.

In carrying its responsibilities, the Committee reviews and monitors the following functions: • external and internal audit; • risk management and business continuity; • statutory compliance; and • internal accounting control.
The Board Audit and Risk Committee is chaired by Mr Pradeep Patel with Mr Tevita Kuruvakadua and Ms Makereta Konrote as members.

The Committee met on four occasions during the year.

The role of the Board Governance Committee is to strengthen the governance of the Bank and to ensure the accountability of the Office of the Governor to the Board.
The main functions of the Committee is to oversee compliance with the Bank’s Corporate Governance Charter and undertake the bi-annual performance appraisal of the Governor and Deputy Governor based on agreed key performance indicators (KPI).

Board members who are not members of the Board Governance Committee are invited to assess the performance of the Governors.
In addition, all staff related matters such as review of the terms and conditions of employment for staff and members of Executive Management are reviewed and approved by this Committee.

The Board Governance Committee is chaired by Mr Tevita Kuruvakadua and the members include Mr Pradeep Patel and Mr Tony Whitton.

The Committee met five times during the review period.

Out of this, four were normal meetings while a special meeting was also convened.
For continuous improvement, the Board undertakes an annual assessment of its own performance as well as that of its two Committees, a process which has been in place since 2013.
The Executive Management also provides a Board and Board Committee Meetings August 2019-July 2020 Attendance by Members Director Board Board Audit and Risk Committee Board Governance Committee Attended Eligible to Attend Attended Eligible to Attend Attended Eligible to Attend Ariff Ali Makereta Konrote Pradeep Patel Tevita Kuruvakadua Tony Whitton NM - Not a Member Source: Reserve Bank of Fiji 11 6 11 11 10 11 11 11 11 11 0 4 4 NM NM 4 4 4 NM 1 5 5 3 1 5 5 5 11 RBF Board Meetings during the financial year Reserve Bank of Fiji Annual Report 13 Reserve Bank of Fiji Annual Report performance assessment of the Board Directors on an annual basis, commencing in 2017.
Annual evaluations are also conducted for the Bank’s internal and external auditors.

Results of the assessments are shared with the internal and external auditors, respectively.

Bank Management The Executive Management of the Reserve Bank comprises the Governor, Deputy Governor and all Head of Groups.
The Governor is advised by a number of internal committees within the Bank: - • • • • • • the Executive Management Committee meets fortnightly to consider the management and day-to-day operations of the Bank; the Monetary Policy Committee meets monthly, or more often as necessary, to discuss economic and monetary developments; the Market Operations Policy Committee meets monthly to discuss the Bank’s domestic markets operations; the Financial System Policy Committee meets monthly to review financial system soundness and stability; the Investment Committee meets monthly to provide strategic direction and oversight of the Bank’s foreign investments; the Financial System Development Policy Committee meets monthly to discuss the financial system and developments in capital markets, payment systems, financial inclusion and consumer issues including • • • • complaints management; the Corporate Services Policy Committee meets quarterly to discuss matters relating to internal services; the Currency Technical Committee meets monthly to discuss issues relating to currency management and numismatics; the Information Technology Steering Committee meets quarterly to discuss IT development and operations; and the Risk and Business Continuity Management Committee meets quarterly to identify and assess risks and their impact on the business of the Bank, formulate effective strategies to address these risks as well as respond, manage and recover from any incident or crisis event faced by the Bank.
The Governor (or in his absence, the Deputy Governor) chairs all these Committees.

Delegation of Authority All activities and expenditure in the Bank must be authorised in accordance with the respective delegations, policies and procedures.

The Board receives monthly financial reports comparing the actual outcomes against budget.

The Code of Conduct policy provides guidance on compliance with ethical standards.
The Declaration of Compliance, signed annually by all staff, provides assurance of understanding and compliance with the Code of Conduct, Delegation of Authority and all internal policies of the Bank.

The Delegation of Authority is updated regularly to ensure that it is current and relevant.

During the review period, changes were made to the Delegation of Authority amidst the COVID-19 pandemic, for operations with external counterparties to continue during the lockdown period.
Conflict of Interest As part of ensuring good governance practices and providing transparency, the Bank has in place policies and procedures to guide and protect staff and board members with respect to incidents and concerns around actual or perceived conflicts of interest.
These policies require disclosure of any known and potential conflicts of interest and requires all representatives of the Bank to conduct themselves with honesty and integrity in all dealings in the course of their work for the RBF, both within and outside of the Bank.

The Bank maintains a Conflict of Interest Policy and a Conflict of Interest Register for its Board Directors.

Depending on the nature of matters discussed and the conflict declared, Directors may be excused from the meeting.
On a quarterly basis, a report on all conflicts of interest declared is provided to the Board Governance Committee.

Directors are also required to complete a Declaration of Compliance at the end of the year.

The Declaration of Conflict of Interest database is updated during the course of the year by the Directors.

Strategic Plan The Bank’s 2019-24 Strategic Plan guides the achievement of deliverables and initiatives of the Bank in the next five years and from which annual work plans are distilled.
A continued focus on excellence and innovation in policy formulation and 14 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 15 that would be either brought forward or re-scheduled for a later date.

In doing so, the Bank brought down its operating expenditure by $1.8 million when compared to the previous FY.

The final Annual Work Plan and Budget for the 2020-21 financial year were presented and approved by the Board, in its June meeting.
In terms of monitoring, heads of Groups are responsible for ensuring that scheduled outcomes within both the Strategic and Work Plans are achieved.

For the 2019-20 FY, some reprioritisation of output were made during the year as the Bank realigned resources in the prevailing COVID-19 environment.

analysis and operational efficiency, underpins the Strategic Plan.

Monitoring tools have been developed to ensure that there are regular reviews of the plan and reporting to the Board.
A review of the progress in implementation of the 2019-24 Strategic Plan is undertaken on a quarterly basis.

During the first year of the 2019-24 Strategic Plan, the Bank met 93 percent of its planned outcomes and targets.

A few outputs were reprioritised and shelved as a result of COVID-19 cost and resource rationalisation efforts.

Corporate Planning and Monitoring Corporate planning is undertaken annually in the Bank.
The Work Plan is developed and presented in line with the strategic priorities and missions of the Bank.

Every strategy, output and process must identify with a mission statement or focus area of the strategic priority, which in turn will contribute to the achievement of the Vision of the Bank.

Each mission statement has a list of Key Result Areas that aligns to individual KPIs.

The initial formulation of the Bank’s Work Plan for the new FY commences in April.
Extensive discussions are held in preparing the Annual Work Plan.

Groups held interactive planning workshops in May and feedback was obtained from mostly internal stakeholders, due to the restrictions based on social distancing, on suggested areas to be considered by the Bank in preparing its Annual Work Plan.

In resourcing the Annual Work Plan, the Bank uses zero based budgeting in determining the necessary financial resources for the coming year, in line with on the work plans submitted by the Groups.
Given the projections for next year’s income, the Bank carried out an extensive cost-cutting exercise, especially in revisiting operating expenditure as well as reviewing any large capital expenses Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 15 15 2019-20 A T A G L A N C E Fiji's Real GDP -21.7% 2020 economic growth rate forecast Overnight Policy Rate Foreign Reserves 0.25% July 2020 $2.1b Sufficient to cover 7.7 months of retained imports, July 2020 Inflation Rate -1.6% July 2020 Reserve Bank’s Financial Performance $30.1m Profit for 2019-20 FY Currency in Circulation $870.7m 31 July 2020 No.
of Employees at RBF Gross Assets of Fiji's Financial System Personal Properties Securities Registry 199 Male - 108 Female - 91 in 2019-20 FY $22.8b June 2020 60,831 Filings on the registry by 6 commercial banks, 4 credit institutions, 12 non-bank financial institutions, 4 car dealers, 4 hire purchase companies and 42 law firms Disaster Rehabilitation & Containment Facility $92.9m Against the total allocation of $100m in 2019-20 FY Import Substitution & Export Finance Facility $133.6m Against the total allocation of $300m in 2019-20 FY Mobile Money 152,467 Active Mobile Money Accounts 2019-20 FY 16 Reserve Bank of Fiji Annual Report 16 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 17 ECONOMIC OVERVIEW The COVID-19 pandemic and its containment measures combined with the on-going geopolitical tensions, have significantly dented global growth prospects.
Consequently, the spillovers from the global meltdown will have significant negative implications on the domestic economy, which is forecast to contract by 21.7 percent in 2020, the sharpest contraction since independence.

International Economic Developments The IMF5 expects the global economy to contract by 4.4 percent in 2020, following a growth of 2.8 percent in 2019.
The global contraction is on account of weak output anticipated in advanced and emerging market and developing economies as extended containment measures relating to the pandemic has severely restrained private consumption and investment, as well as disrupted international trade and travel.

Additionally, the ongoing trade dispute between the United States (US) and China has led to more uncertainty over the global outlook this year.

In 2021, the global economy is forecast to rebound by 5.2 percent.
The recovery is highly contingent on the availability of a vaccine, the opening of borders and the resumption of international travel.

All of Fiji’s major trading partners are expecting to contract in 2020, except for China, which is envisaged to grow by 1.9 percent.

The US economy is forecast to contract by 4.3 percent in 2020, in contrast to the 2.2 percent growth noted in 2019.
The projected contraction is on account of the significant fall in consumer spending, business investment and exports amidst the pandemic.

Furthermore, labour market conditions have deteriorated significantly as the unemployment rate rose to 10.2 percent in July 2020 from 3.7 percent in July last year.

To bolster household and business spending, as well as assist state and local governments during the COVID-19 crisis, the US Government launched a string of fiscal stimulus programmes.
On its end, the Federal Reserve reduced the target range for its federal funds rate by 100bp to 0-0.25 percent on 15 March and started with its quantitative easing programme.

The Eurozone economy is forecast to decline by 8.3 percent in 2020, following a 1.3 percent expansion in 2019.

The outturn is due to weak business and household spending and sluggish external demand.
World Gross Domestic Product (GDP) Growth Rates t n e c r e P 6 5 4 3 2 1 0 -1 -2 -3 -4 -5 -6 5.2 3.8 3.6 2.8 -4.4 2017 2018 2019 2020f 2021f Source: IMF World Economic Outlook October 2020 5 October 2020 IMF World Economic Outlook (WEO).
-4.3% US 2020 growth rate -5.3% Japan's 2020 growth rate -6.1% New Zealand's 2020 growth rate -8.3% Eurozone 2020 growth rate -4.2% Australia's 2020 growth rate 1.9% China's 2020 growth rate Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 17 Labour market conditions have worsened compared to last year, while annual inflation remained low largely underpinned by depressed demand and weak commodity prices.
To alleviate the economic and financial fallout from the pandemic, the European Central Bank kept its benchmark interest rate at zero percent (unchanged since March 2016) and also provided an unprecedented level of stimulus to cushion the impact in the region.

Also, many governments in the region pledged loan guarantees to reduce banks’ credit risks to maintain financial stability in their economies.
The Japanese economy is envisaged to contract by 5.3 percent this year, much lower than the 0.7 percent growth registered in 2019.

The expected decline is mainly due to the disruptions to consumption and investment activities and reduced demand for Japanese exports.

In light of the anticipated severe contraction, the Government rolled out stimulus measures of around 40.0 percent of GDP in May.

Labour market conditions remained weak with muted inflationary pressures.
The Bank of Japan kept its policy interest rate at -0.1 percent (unchanged since January 2016) and provided stimulus funding for business and households to mitigate the negative impact of the pandemic.

The Australian economy is forecast to contract by 4.2 percent in 2020, the first contraction in 29 years.6 The expected negative outcome is driven mainly by declines in household consumption, gross fixed capital formation and inventories.
Labour market conditions remained weak as the unemployment rate climbed to the highest level since November 1998, while inflation remained low on the back of weak commodity prices.

As part of its monetary stimulus, the Reserve Bank of Australia (RBA) lowered the cash rate further from 0.5 percent in February to an all- time low of 0.25 percent in March complementing it with its market operations to ensure adequate levels of liquidity in the Australian financial system.
Moreover, the combined fiscal and monetary stimulus injected by the authorities is one of the largest amongst the Group of 20 nations.

The New Zealand (NZ) economy is projected to contract by 6.1 percent in 2020, compared to the 2.2 percent growth last year.

The contraction is expected to be driven by declines in services, construction, transport & postal and warehousing activities.

Annual inflation remained low amid depressed demand and low commodity prices.
To support economic activity, employment and inflation, the Reserve Bank of NZ (RBNZ) reduced its official cash rate from 1.0 percent in February to a record low of 0.25 percent in March.

The RBNZ continued with its alternative monetary policy tools such as the Large Scale Asset Purchase programme to keep interest rates low in the short to medium term to supplement the NZ Government’s COVID-19 response package aimed at assisting businesses and individuals affected by the pandemic.
Economic Developments in Fiji The Fijian economy is anticipated to contract by 21.7 percent in 2020 following a 0.4 percent7 decline in 2019.

The outturn is mostly attributed to the significant fall in tourism activity and rippling effects to the rest of the economy in light of the pandemic.

The major drivers for the decline in 2020 include the accommodation & food services; wholesale & retail trade; transport & storage; financial & insurance; and construction sectors.
The severe economic downturn is in line with the projected global contraction, weak domestic demand and sluggish sectoral performances.

Risks to the outlook remain on the downside as the anticipated opening of international borders in the final quarter of this year may not materialise given the second round of COVID-19 cases in Australia and NZ.

Sectoral performances have been broadly weak in the 2019- 20 FY with notable declines in visitor arrivals, electricity, gold and timber output.
Similarly, aggregate demand indicators point to dismal consumption and investment activities in the review period.

In the 2019-20 FY, visitor arrivals declined sharply by 40.5 percent to 532,730 visitors, compared to a growth of 4.2 percent recorded in the previous FY.

Lower arrivals from all source markets underpinned the negative outcome as travel restrictions and border closures since March 2020 due to the pandemic halted tourism activity.
The ramifications of the downturn in tourism on other industries were swift.

COVID-19 restrictions caused disruptions in the transport & storage sector, especially air transport as planes were grounded due to the closure of international borders.

In addition, businesses in the services sector such as wholesale & retail and entertainment were affected with the imposition of strict health guidelines and nationwide curfew, which limited the movement of people and severely impacted domestic economic activity.
Electricity consumption declined by 4.7 percent in the reviewed FY, driven by lower demand from commercial (-5.1%), industrial (-11.0%) and other8 (-7.0%) users.

Consistent with the low demand, electricity production declined by 6.7 percent in the same period compared to a growth of 3.7 percent in the previous FY.

Nonetheless, the generation mix improved as 56.5 percent of total electricity was produced using 6 The economy grew by 1.8 percent in 2019.
7 Mainly driven by the transport & storage, public administration & defense, manufacturing and information & communication sectors.

Reserve Bank of Fiji Annual Report 18 8 This includes streetlights and institutions such as schools.

Reserve Bank of Fiji Annual Report 19 renewable sources in the 2019-20 FY, compared to the 55.2 percent achieved in the last FY.
Gold production declined by 8.9 percent to 34,254 ounces in the 2019-20 FY owing to technical issues, power supply constraints and coronavirus-related supply chain disruptions.

However during the same period, gold exports rose by 16.4 percent as the price for this safe-haven asset rose amid the global health pandemic.

The timber industry recorded weak results in the 2019- 20 FY, owing to persistently lower production and depressed foreign demand.
Pine wood supply declined by 5.7 percent to 377,762 tonnes.

Consequently, woodchip and sawn timber production fell by 16.3 percent and 18.2 percent to 250,465 tonnes and 22,837.2 cubic metres (m3), respectively.

Mahogany production also declined by 25.2 percent to 15,150.4m3.

In the sugar industry, the 2019 crushing season ended with 1,806,379 tonnes of harvested cane, yielding 168,702 tonnes of sugar.

Cane and sugar production rose by 6.5 percent and 5.3 percent respectively.
In the 2020 season9, a total of 102,037 tonnes of sugar has been produced from 1,141,964 tonnes of cane, an annual increase of 0.8 percent and 10.2 percent in sugar and cane output, respectively.

The positive outcome is primarily due to increased mill efficiency at the Rarawai and Labasa mills as well as reduced inside/outside stoppages.

in the same period.
in the same period.

Moreover, commercial banks’ new lending for consumption purposes declined over the fiscal year by 17.1 percent to $959.3 million, led by lower lending to both private individuals and the wholesale, retail, hotels & restaurants categories.

Labour market conditions deteriorated during the 2019-20 FY as a result of job losses in tourism and related industries in the second half of the FY.
Evidently, the number of vacant positions advertised in the RBF’s Job Advertisements Survey10 decreased by 36.8 percent in the review FY.

Lower recruitment intentions were noted in all sectors, particularly the transport, storage & communication; construction; mining & quarrying; and wholesale & retail trade & restaurants & hotels sectors.

Given the weak labour market conditions, consumer spending softened further.
Net Value Added Tax (VAT) collections declined by 24.5 percent in the 2019-20 FY driven by lower collections from import VAT (-24.6%), domestic VAT (-9.6%) and other Government departments (-1.5%).

Also, second-hand and new vehicle registrations fell by 56.7 percent and 36.7 percent respectively Investment indicators remained broadly negative in the review period.
Construction activity noted sluggish results as domestic cement sales fell by 9.6 percent in the 2019-20 FY as major private sector projects stalled.

Additionally, new lending to the building & construction sector fell by 36.6 percent in the same period.

Despite the marginal increase in Government’s capital expenditure as announced in the 2020-21 National Budget, domestic investment is forecast to fall to 13.0 percent of GDP in 2020 from 20.1 percent of GDP in 2019 due to weak private sector investment.
In the 2019-20 financial year, the fiscal deficit is estimated to be $837.0 million, equivalent to -8.2 percent of GDP.

This is higher than the $419.3 million deficit (-3.6 percent of GDP) recorded in the 2018-19 FY.
The higher deficit is on account of lower Government revenue collections Fiji’s GDP Growth Rates Government Balance 5.4 3.8 2.4 -0.4 Net Deficit -2.1 -4.4 -3.6 -8.2 -20.2 P D G f o t n e c r e P 0.0 -5.0 -10.0 -15.0 -20.0 -25.0 -21.7 2016(r) 2017(r) 2018(r) 2019(p) 2020(f) 2016-17 2018-19r 2020-21b t n e c r e P 10 5 0 -5 -10 -15 -20 -25 -40.5% Visitor arrivals in 2019-20 FY -36.8% Number of vacant positions advertised in 2019-20 FY Source: Fiji Bureau of Statistics and Macroeconomic Committee Source: Ministry of Economy 9 As at 28 September since respective commencement of crushing at the various mills in 2020 (10 June for Labasa, 23 June for Rarawai and 10 July for Lautoka).
10 This is based on advertised vacant positions in both the Fiji Times and Fiji Sun.

Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 19 stemming from subdued tourism industry and declining business and consumer activity.

domestic and international price developments, inflation is anticipated to remain in negative territory in 2020.

For the 2020-21 FY, Government has budgeted for a net deficit of $2,001.0 million, equivalent to -20.2 percent of GDP.
Given the halt in tourism activity and the overall weak economy, total revenue is expected to fall sharply by 38.0 percent.

On the other hand, total expenditure is anticipated to increase by 3.9 percent, reflecting the Government’s efforts to stimulate the economy and support livelihoods.

Total Government debt stood at 65.2 percent of GDP at the end of the 2019-20 FY, higher than 49.3 percent recorded in the previous fiscal year on account of the higher deficit.
Inflation11 averaged -1.3 percent in the 2019-20 FY, much lower than the 3.8 percent average recorded in the previous fiscal year.

The negative inflation rate was driven by lower prices of yaqona, vegetables, fruits, petrol, kerosene and diesel.

Given Financial conditions were accommodative, reflective of quantitative easing measures aimed at stimulating economic activity during the fiscal year.
In July 2020, broad money rose on an annual basis by 0.7 percent ($56.5m), compared to a 1.7 percent ($140.6m) increase in the same period last year.

The growth was due to increases in both Net Foreign Assets (NFA) and Net Domestic Assets (NDA).

The positive outturn in NFA was reflective of the higher gross reserves position.
Growth in NDA slowed to 0.7 percent in July, compared to 6.1 percent in 2019, mainly due to the annual deceleration in private sector credit (1.2% from 7.6%) as a result of the slowdown in lending to households and private sector business entities by both commercial banks and credit institutions.
New lending by commercial banks registered a decline of 11.5 percent (-$304.6m), led by contraction in new loans to the wholesale, retail, hotels & restaurants; private individuals category; building & construction and electricity, gas & water sectors.

Liquidity in the banking system at the end of July 2020 remained ample at $765.2 million.
The commercial banks’ weighted average outstanding lending rate rose over the year to 6.14 percent in July 2020, higher by five bp when compared to the same period last year.

However, the new lending rate fell by 47bp to 5.91 percent in July 2020.

Similarly, the commercial banks’ existing and new time deposit rates fell on an annual basis to 3.52 percent (from 4.25%) and 2.74 percent (from 5.42%), respectively.
In the 2019-20 FY, total exports (excluding aircraft) fell by 8.9 percent to total $1,952.8 million, while total imports (excluding aircraft) declined by 20.4 percent (to $4,321.9m).
As such, the merchandise trade deficit (excluding aircraft) narrowed by 28.0 percent to $2,369.1 million, Commercial Banks’ Lending and Deposit Rates Trade Deficit t n e c r e P 8 7 6 5 4 3 2 1 0 2015 Loans Time Deposits Savings Deposits n o i l l i M $ 0.0 -400 -800 -1,200 -1,600 -2,000 -2,400 -2,800 -3,200 -3,600 2016 207 2018 2019 2020 2016 2017-18p 2019-20p Source: Reserve Bank of Fiji Source: Fiji Bureau of Statistics $765.2m Liquidity as at 31 July 2020 65.2% of GDP Total Government debt at the end of 2019-20 FY 11 Deflation since October 2019.
20 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 21 compared to a 1.5 percent expansion in the previous FY.

The significant contraction in re- exports of machinery & transport equipment (excluding aircraft), mineral fuels and fresh fish together with lower exports of crude material, miscellaneous manufactured articles, beverage & tobacco and food & live animals contributed to the outcome in exports.
The decline in imports was led mainly by reduced imports of mineral fuels, manufactured goods, miscellaneous manufactured goods and chemicals.

In the July 19–June 20 period, tourism earnings declined by 28.5 percent to $1,478.2 million, compared to a 5.4 percent growth in the previous corresponding period.
The marked decline was mostly on account of the closure of international borders and travel restrictions to all inbound visitors, which led to a reduction in the number of visitor arrivals and earnings across all major source markets in the year to June.

Inward remittances in the 2019-20 FY grew marginally by 0.8 percent to total $588.4 million, compared to a 5.1 percent growth in the corresponding period in 2019.
The outcome was due to higher inflows for gifts, maintenance & donations (1.1%), which more-than-offset the decline in personal receipts (-1.1%) and immigrant transfers (-12.9%).

Notably, monthly inward remittance for July 2020 was at an all-time high of around $63.2 million, 45.0 percent higher over June 2020 ($43.6m) and 37.3 percent higher than July 2019 ($46.0m).
The current account deficit (excluding aircraft) is estimated to be around $817.4 million (8.0% of GDP) in the 2019-20 FY, higher than the $684.3 million (6.7% of GDP) in the 2018- 19 FY.

This outcome is mainly on account of the lower-than-expected services and secondary income balance, which more-than-offset the improvement in the trade and primary income deficit.
Tourism Earnings Personal Remittances 2,400 2,000 1,600 n o 1,200 i l l i M $ 800 400 0 n o i l l i M $ 700 600 500 400 300 200 100 0 -8.9% 2019-20 FY Total exports (excluding aircraft) -20.4% 2019-20 FY Total imports (excluding aircraft) 2016 2017 2018 2019 Jul 19- Jun 20 2016 2017-18 2019-20 Source: Fiji Bureau of Statistics Source: Reserve Bank of Fiji Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 21 21 MISSION CONDUCT MONETARY POLICY TO FOSTER SUSTAINABLE AND INCLUSIVE ECONOMIC GROWTH The RBF under the RBF Act (1983) is entrusted with the conduct of monetary policy in Fiji aimed at maintaining price stability and adequate levels of foreign reserves.
22 Reserve Bank of Fiji Annual Report 22 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 23 Monetary Policy Formulation Chronology of Monetary Policy Actions The synchronised global slowdown, soft domestic demand and lacklustre sectoral performances underpinned the 0.4 percent decline in the Fijian economy in 2019.
This year, growth prospects have been shattered by the Coronavirus, which led to travel restrictions and international border closures that in turn have severely impacted the tourism industry and the broader economy.

Consequently, job losses have risen significantly across the board, causing considerable losses in incomes and livelihoods and placing undue pressure on the Government’s tax revenues.
Aggregate demand deteriorated significantly as consumer spending slumped and private sector investment stalled.

Against this backdrop, the Government adopted an expansionary fiscal stance to stimulate domestic demand and support economic activity.

As such, a net deficit of -20.2 percent of GDP has been budgeted in the 2020-21 national budget, the highest shortfall since Fiji’s independence.
To mitigate the impact of the pandemic, the Reserve Bank also implemented numerous policy measures to stabilise the economy whilst ensuring that the twin objectives of monetary policy remained intact.

On 18 March, the Bank reduced the OPR by 25bp to 0.25 percent from 0.5 percent and lowered the interest rate corridor on either side of the OPR by 25bp from 50bp previously.

Consequently, the repurchase rate12 fell to 0.50 percent from 1.00 percent.
The RBF also implemented several unconventional monetary policy measures to assist businesses cushion the impact of the pandemic.

The Natural Disaster and Rehabilitation Facility was recalibrated and renamed to DRCF on 26 March.

Correspondingly, the funding for this facility was raised to $60 million from $40 million and further increased to $100 million13 in May.
To preserve external stability, the Reserve Bank also introduced exchange control measures to prevent capital flight and speculative activities.

Furthermore, the RBF increased the allocation to the ISEFF with an additional $100 million to $300 million in 30 April 2020 to ensure that credit to exporters, large scale commercial agricultural farmers, public transportation and renewable energy businesses were available at affordable rates from relevant financial institutions.
The Bank strengthened its role in the administration of the MSME Credit Guarantee Scheme14 to help affected businesses.

In addition, the RBF invested $300 million in Government bonds between March and July 2020 to assist Government meet its financing needs.
All these measures have raised liquidity levels in the financial system and put interest rates, especially deposit rates, on a Inflation (Annual Percent Change) Foreign Reserves t n e c r e P 8 6 4 2 0 -2 -4 2,400 2,200 2,000 n 1,800 o i l l i M $ 1,600 1,400 1,200 1,000 2015 2016 2017 2018 2019 Jul 2020 2016 2017 2018 2019 July 2020 Source: Fiji Bureau of Statistics Source: Reserve Bank of Fiji $60m Disaster Rehabilitation and Containment Facility in 2019-20 FY $100m Import Substitution & Export Finance Facility in April 2020 Reserve Bank of Fiji Annual Report 12 The rate at which commercial banks borrow from the RBF to meet short term financing needs.
13 Out of this, $75 million was lent to the national carrier (Fiji Airways) through FDB in July 2020.

14 The Government established the scheme in 2012 with a $2.5 million allocation and this was subsequently raised to $4.0 million in 2013.

Under the COVID-19 Response Budget in March 2020, the Government allocated an additional $5.0 million to a total of $9.0 million.

Reserve Bank of Fiji Annual Report 23 downward trajectory.
Monetary Policy Outcomes Annual inflation stood at -1.6 percent in July 2020, much lower than the 0.7 percent in July last year driven by lower prices of yaqona, domestic fuel and second-hand cars.

The 2020 year-end inflation rate is expected to fall further to -3.0 percent, on account of the actual inflation outturn in the first seven months of 2020, lower crude oil prices and reduced duties15 announced in the 2020-21 National Budget.
Foreign reserves stood at $2,107.0 million in July 2020, sufficient to cover 7.7 months of retained imports.

Notably, Government loan drawdowns, sustained inflow of remittances coupled with significant declines in imports have contributed positively towards the reserves position so far this year.
Exchange Rates In July 2020, the Fiji dollar (FJD) appreciated against the US (2.1%) and the NZ dollars (NZD) (0.9%), while depreciating against the Euro (-3.9%), the Australian dollar (AUD) (-2.4%) and the Japanese Yen (JYP) (-1.6%) compared to a year ago.

The Nominal Effective Exchange Rate (NEER) Index rose over the year in July (0.2%), indicating a general strengthening of the domestic currency.
In the same period, the Real Effective Exchange Rate (REER) Index fell slightly by 2.3 percent, denoting an improvement in trade competitiveness due to lower domestic inflation.

Monetary Policy Implementation Open Market Operations During the first seven months of the 2019-20 FY, the Reserve Bank continued with its accommodative monetary policy stance by keeping the OPR unchanged at 0.50 percent.
Maintaining a low policy rate was appropriate for providing necessary stimulus for the economy in light of weaker global and domestic conditions.

Nonetheless, as the negative impact of the pandemic weighed on international travel and trade and consumer and business sentiments further weakened, the Reserve Bank reduced the OPR by 25bp to 0.25 percent in March 2020.
The reduction in the OPR was necessary to stimulate demand by reducing the cost of borrowing and support much-needed consumption and investment.

Associated with the lowering of the OPR, the interest margin on either side of the OPR was reduced by 25bp from 0.50bp.

As such, the lending rate to commercial banks known as the repurchase facility (repo) rate was reduced from 1.00 percent to 0.50 percent while the deposit rate remains at zero percent.
Furthermore, since there was no auctioning of RBF Notes throughout the year, there was no associated cost to monetary policy.

Management of Foreign Reserves The RBF is assigned the authority and responsibility to manage Fiji’s foreign reserves under the RBF Act (1983).

Foreign reserves management is an essential function of the Bank and is performed with the primary objectives of safety, liquidity and profitability.
Internal credit criteria ensures that the Bank invests reserves in securities issued or guaranteed by foreign Governments and other issuers with strong credit ratings.

Similarly, deposits and foreign exchange deals are transacted with counterparties who meet minimum credit requirements.
For liquidity requirements, the Bank ensures that all investments are readily convertible REER/NEER (Monthly Average) Overnight Policy Rate 112 108 104 100 96 92 88 84 x e d n I REER NEER Inter-bank Rate REPO Rate 0.5% Overnight Policy Rate (OPR) 0.25% Deposit Rate 0.00% 80 2015 2016 2017 2018 2019 Jul 2020 Source: Reserve Bank of Fiji Source: Reserve Bank of Fiji 15 Duties were comprehensively reduced for a range of food items, alcoholic beverages, white goods, motor vehicles and other items.
24 Reserve Bank of Fiji Annual Report Lending Facility Overnight Interbank Rate Deposit Facility Time Reserve Bank of Fiji Annual Report 25 into cash at minimal cost.

In addition, the Bank attempts to maximise income within approved guidelines.

The composition of RBF’s foreign reserves holdings is primarily determined by currencies in the Fiji dollar basket, namely the USD, Euro, JPY, AUD and NZD.

The Bank also holds IMF Special Drawing Rights and small amounts of gold and British pound sterling.
Global financial markets in the first half of the FY 2019-20 were driven by uncertainties surrounding a number of factors including the US- China trade tensions, geopolitical fears and a synchronised global economic slowdown.

However, these concerns faded into the background with the outbreak of the coronavirus in early 2020 which delivered a giant shock to the world economic system.
To mitigate the spread, countries introduced drastic containment measures that brought economic activity to a near standstill.

Consequently, global growth deteriorated with most economies expected to fall into recession in 2020.

In response, Governments rolled out massive stimulus packages while central banks cut interest rates to new record lows and expanded their range of unconventional monetary policy tools in an effort to cushion the economic impact of the pandemic.
As a result, interest rates in Fiji’s trading partner countries fell to unprecedented low levels, presenting an ongoing challenge for foreign reserves management.

Gross foreign reserves (RBF holdings) averaged around $2,198.3 million during the FY 2019-20, higher than the $2,027.4 million average of the previous financial year.

The foreign reserves level peaked at $2,391.2 million in February 2020, before declining to $2,107.0 million at the end the financial year.
Investible reserves, which accounted for 91.0 percent of gross foreign reserves, also averaged higher at F$2,002.5 million, compared to F$1,837.0 million in the prior fiscal year.

Net foreign exchange income for the FY 2019-20 decreased to $38.9 million from $45.8 million the previous year.

The notable fall in income reflected the decline in global interest rates.

Similarly, the return on investible reserves reduced from 2.49 percent in FY 2018-19 to 1.94 percent in FY 2019-20.
The RBF foreign reserves portfolio achieved a return of 2.7 percent, outperforming the RBF benchmark portfolio return of 1.6 percent.

The impact of exchange rate movements on the value of foreign reserves is reflected in the Revaluation Reserve Account (RRA).

As a hedge against volatility in exchange rates, foreign reserves holding is aligned to the currencies in the Fiji dollar basket.

In accordance with the RBF Act (1983), a fifth of the year-end balance in the RRA is transferred to the Government.
At the end of July 2020, the RRA had a balance of $13.5 million.

As a result, $2.7 million was transferred to Government in the FY 2019-20, compared to $1.5 million transferred in the FY 2018-19.

Exchange Rates Exchange rate setting is a daily responsibility of the Bank with the Fiji dollar fixed to a basket of five currencies: the USD, AUD, NZD, JPY and the Euro.

This exchange rate regime is appropriate for Fiji as it reduces volatility in exchange rates and is a nominal anchor for inflation.
The weight of each currency in the basket is reviewed annually and is based on the value of Fiji’s Performance of RBF Portfolio against Benchmark Return on External Reserves RBF Portfolio RBF Benchmark Aug 2017- Jul 2018 Aug 2018- Jul 2019 Aug 2019- Jul 2020 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 t n e c r e P Jan-Jul 2016 Source: Reserve Bank of Fiji 2016-17 2017-18 2018-19 2019-20 Net Foreign Exchange Income ($M) 45.0 45.7 38.9 Average Month-End Level of Investible Reserves ($M) 2,051.8 1,837.0 2,002.5 Return on Investible Reserves (%) 2.19 2.49 1.94 Source: Reserve Bank of Fiji NZD | 21.9% JPY | 4.8% EUR | 4.2% Exchange Rate Weights AUD | 29.3% Source: Reserve Bank of Fiji USD | 39.8% Reserve Bank of Fiji Annual Report 25 Reserve Bank of Fiji Annual Report merchandise trade, services and debt servicing transactions.
The current exchange rate weights16 are as follows: USD (39.8%), AUD (29.3%), NZD (21.9%), JPY (4.8%) and Euro (4.2%).

The value of the Fiji dollar against other basket currencies is calculated from the mid-rate of the Fiji dollar relative to the US dollar set daily.

These exchange rates are disseminated to local commercial banks by 9.00am and published on Reuters and Bloomberg platforms as well as the RBF website.
The RBF official exchange rates are used by local commercial banks to establish rates for their daily operations within allowable spread limits.

Foreign Currency Receipts and Payments The delivery of foreign currency banking services to the Fijian Government, supranational organisations17 and other central banks continued during the financial year.
Exchange Control Exchange controls continue to play an essential role in the maintenance of adequate foreign exchange reserves and monetary policy formulation in Fiji.

During the earlier part of the financial year, exchange controls were maintained in line with the prevailing outlook for foreign reserves.

However, following the deterioration in the external sector outlook from the impact of COVID-19 during the second half of the financial year, certain controls were re-introduced.
Liaison with commercial banks and authorised foreign exchange dealers were stepped up immediately to ensure effective monitoring systems were in place.

Given that many delegated activities of the commercial banks were reduced or returned to the direct authority of the Reserve Bank, a surge in the number of public enquiries at the Bank was anticipated.

The Exchange Control e-service played a critical role during this period in view of the nationwide restriction on social distancing.
The Bank continued to place due emphasis on compliance and undertook several spot checks on the operations of foreign exchange dealers.

Meetings with exporters continued, resulting in the reconciliation of $1,541 million, representing over 90 percent of outstanding export receipts during the year.

Collaboration with other Government agencies continued during the year with the aim of improving efficiencies in work processes and strengthening compliance measures.
16 Based on results of 2020 Annual Review of Exchange Rates Weights.

17 This includes the ADB, IMF, the International Development Association and the International Bank for Reconstruction and Development.
26 Reserve Bank of Fiji Annual Report 26 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 27 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 27 27 Financial System Regulation and Supervision The Fijian financial system has remained stable in the reporting 2019-20 FY, despite the significant challenges brought on by some natural disasters and the COVID-19 pandemic.
The stability of the financial system has been a reflection of the continued satisfactory performance of the commercial banking industry, which registered satisfactory capital and earnings levels during the year.

The insurance industry mirrored the performance of the banking industry, backed by strong consolidated solvency positions and satisfactory earnings and liquidity levels.
The FNPF, as the single largest financial institution in Fiji, continued to report positive operating results over the reporting period and adequately met its solvency requirement as mandated under section 32 of the FNPF Act (2011).
Prudential Regulation Regulation by the Reserve Bank of Fiji involves the setting of requirements through prudential supervision policies and the issue of regulations and guidance under the various legislations which provides for the relevant powers to supervise the Fijian financial system.
Prudential Supervision Policy Development and Review The Reserve Bank continued to enhance the effectiveness of its regulatory framework through the development of new and review of existing, prudential supervision policies.

The review of the Banking Supervision Policy Statement Nos.
9A and 9B on Liquidity Risk Management Requirements for banks and credit institutions, were completed during the year together with the drafting of the new policy to be issued on Minimum Requirements for Cybersecurity of Supervised Entities.

This new policy will be issued for industry consultation in the upcoming year.
Acknowledging the findings of the recent Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in Australia, the Reserve Bank sought in August 2019 to confirm its role as conduct regulator for the Fijian financial system in addition to its prudential regulator role.

In this regard, the Reserve Bank has embarked on a reform programme to review how conduct risk is managed by supervised entities, with the objective of developing its conduct risk management framework.
Phase 1 of the reform which was undertaken in the review year, included the completion of a self-assessment questionnaire by all supervised entities.

Results of the self-assessment questionnaire have been analysed and will feed into Phase 2 of the programme where a thematic review on conduct risk and culture will be conducted by the Reserve Bank in the next financial year, after which the necessary framework for the supervision of conduct risk will be developed and implemented.
For the insurance industry, apart from the continued parallel implementation of the draft revised Solvency Requirements, the Reserve Bank continued to liaise with the industry on exploring the enablement of fronting arrangements with the objective of increasing underwriting capacity of domestic insurers.
On its oversight role of the capital markets, the Reserve Bank continued to review policies relating to Capital Raising through Equity and Debt Securities and the development of a Trustee approval framework in line with the wholesale corporate bonds development project, on which the International Finance Corporation (IFC) has been providing technical assistance to Fiji.
A significant project also commenced during the year regarding the establishment of a Regional Know Your Customer (KYC) Utility for a number of South Pacific countries.

The Reserve Bank as a member of the South Pacific Central Banks Forum undertook several liaison sessions at regional and national levels to establish the initial requirements of the project and work on this will continue in the next 12 months.
Legislation Review and Developments Work on enhancing the legislative framework underpinning the Reserve Bank’s supervision role also continued on various financial sector reforms being undertaken.

These included the review of the Insurance Act 1998, though the technical assistance of the IMF Pacific Financial Assistance Centre (PFTAC).

The review is expected to be completed in 2021.


Observations have also been made for the amendment of the Fair Reporting of Credit Act 2016 in light of the ongoing work regarding the national objective of improving Fiji’s Ease of Doing Business ranking.

The relevant amendments will be proposed through the usual law amendment process in the 2020-21 FY.
Work regarding the finalisation of the proposed Credit Union legislation is ongoing and now onto the final phase of legal vetting with the aim of taking the proposed draft legislation through the relevant approval process, in the next 12 months.

28 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 29 Licensing The Reserve Bank continued to undertake licensing and registration of relevant institutions during the review period.
Licences were renewed as required for commercial banks, credit institutions, insurance companies and intermediaries, foreign exchange dealers, securities exchange, managed investment schemes, stockbrokers and investment advisers.
After being under offsite monitoring by the Reserve Bank in line with relevant Ministerial directives issued over the years, the Fiji Development Bank officially came under the full supervisory ambit of the Reserve Bank in November 2019 as directed by the Minister for Economy pursuant to section 69 of the Banking Act 1995.

Registration of new and renewed Credit Information Providers and Credit Report Recipients continued during the year.
The Reserve Bank of Fiji also undertook regular liaison with the only registered credit reporting agency, Credit Information Reporting Agency.

Being the regulatory authority responsible for registering capital raising documents as articulated under Part 26 of the Companies Act 2015, the Reserve Bank assessed and approved two capital raising applications during the year.
Prudential Supervision As part of the Reserve Bank’s many supervisory activities, a total of 270 offsite review reports were prepared, five onsite examinations conducted and 92 prudential consultations/ meetings were convened during the 2019-20 FY.

The emergence of the global pandemic mandated closer monitoring of the banking industry.

In view of disruptions to businesses caused by the pandemic, the Reserve Bank continued to impress upon supervised entities the importance of business continuity planning.
The Reserve Bank subsequently developed a ‘Frequently Asked Questions’ document to clarify Essential Financial Services status of Supervised Entities during the COVID-19 national lockdown.
Supervisory guidance was issued to all regulated entities in March 2020, reinforcing the need to ensure adequate risk management during the pandemic which included the review of Business Continuity Planning tests, controls for remote working in consideration of cybersecurity risk and infection control and the supervisory stances taken by the Reserve Bank in line with national containment measures.
These included the suspension of onsite examinations; cancellation of face to face meetings and prioritisation of matters of safety and soundness over other regulatory approvals normally sought by supervised entities.

In seeking to ease the impact of COVID-19 on businesses and households, the banking sector provided relief measures through repayment holidays to affected borrowers, on a case by case basis.
Guidance was issued by the Reserve Bank to commercial banks regarding the prudential treatment and reporting of these moratoriums.

As at 31 July 2020, a total number of 16,891 loan customers accessed the COVID-19 relief packages, amounting to $3.0 billion or 39.1 percent of the total loans of commercial banks and credit institutions.
Closer monitoring continued during the year on the Fiji National Provident Fund with regular prudential consultations conducted as a result of the economic impact of the pandemic.

Due to the surge in unemployment coupled with the increased number of workers on reduced hours, the Fund, in partnership with the Government, introduced withdrawals grounds specifically related to the pandemic, to assist members.
Consultations were also held between the Reserve Bank, the South Pacific Stock Exchange (SPX) and the Registrar of Companies in April 2020 to discuss regulatory relief measures in light of COVID-19, subsequent to which extensions were provided by the SPX on the timeline for the release of annual audited accounts and annual reports of listed companies.
Listed companies were also advised to apply to the Registrar, under the Companies Act 2015, for an extension to the timeline for holding their annual general meetings.

The regulation and supervision of foreign exchange dealers continued during the year, to ensure compliance with legislation and prudential supervision policies relevant to their operations.

There was also regular communication with the industry regarding the impact of the pandemic on remittances and money transfer operations.
Macroprudential Surveillance In October 2019, the Reserve Bank published its fourth Financial Stability Report (FSR).

The Report highlighted that the overall macroprudential risks remained relatively unchanged compared to 2018.

However, downside risks persist, in light of the continued economic moderation, together with the implementation of Government’s fiscal consolidation for the 2019-20 FY.
While the stress test results on commercial banks implied that they were well capitalised to withstand plausible shocks in the short to medium term, there were however, specific areas at institutional and industry level that would continue Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 29 to be closely monitored.

In a similar vein, the rising level of non-performing loans of households and corporates would warrant closer monitoring.
The Technical Assistance (TA) programme following the IMF Financial Sector Stability Review (FSSR) for Fiji continued with a Stress Testing mission from 4-14 November 2019.

The Reserve Bank persisted with the process of assessing and implementing if considered relevant, the recommendations highlighted in the TA reports received.

The pandemic has brought about a greater need for monitoring indicators of financial soundness by the Reserve Bank and also international partners.
In this regard, the Reserve Bank towards the latter half of the financial year committed itself to the provision of financial soundness data to the World Bank, the IMF and other international financial institutions.

The Fijian Financial System Six commercial banks continued to operate in Fiji over the review period through 65 branches and 130 agencies and agent banking centres.
The number of branches decreased by two over the review period, while the number of agencies increased by two when compared to June 2019.
Four credit institutions remained in operation; one superannuation fund (FNPF); seven general insurers; two life insurers; five insurance brokers; 574 insurance agents; 10 foreign exchange dealers; one securities exchange; two managed investment schemes (MIS) companies; 64 capital market intermediaries and participants; one credit reporting agency and five registered credit information providers and credit report recipients.
The number of Electronic Funds Transfer at Point of Sale (EFTPOS) terminals increased over the year from 5,735 to 5,817 and Automated Teller Machines (ATM) from 336 to 339.

Gross Assets of the Financial System Fiji’s financial system grew by 6.4 percent over the year to $22.8 billion in June 2020, with the FNPF and the insurance industry being the major contributors to the annual growth.
Commercial banks continued to dominate the make-up of the financial system assets at 46.7 percent, while the FNPF and the insurance industry accounted for 35.7 percent and 8.4 percent, respectively.
Licensed Financial Entities including Branches/Agencies (Number) 2016 2017 2018 Commercial Banks - Branches - Agencies and Agent Banking - ATMs - EFTPOS Credit Institutions - Branches - Agencies Life Insurance Companies General Insurance Companies Insurance Brokers Insurance Agents1 Foreign Exchange Dealers Money Changers Securities Exchange Managed Investment Schemes (MIS) Property Trusts Investment Advisers Stock Brokers Dealers MIS Representatives Stock Broker/Dealer Representatives Investment Adviser Representatives Credit Reporting Agency Credit Information Provider and Credit Information Recipient 6 69 119 325 6 68 126 338 Jun 2019 6 67 128 336 Dec 2019 6 65 126 339 Jun Off-site review reports in 2019-20 FY 16,891 Loan customers accessed COVID-19 relief packages 5,817 EFTPOS terminals 339 ATMs 1 An agent may hold more than one licence to sell various classes of Insurance in a calendar year.
Source: Reserve Bank of Fiji 30 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 31 The capital markets noted a contraction over the year with the stock market capitalisation and MIS funds under management decreasing by 6.4 percent and 2.6 percent, respectively, while the outstanding bonds recorded a growth of 15.0 percent.
The Commercial Banking Industry The banking industry’s prudential assessment indicators of capital, earnings and asset quality remained at satisfactory levels, while the liquidity position was assessed as marginal resulting in an overall satisfactory assessment as at 30 June 2020.

Commercial banks’ total assets grew by 4.0 percent over the year to $10.6 billion as at 30 June 2020.

This was mainly due to the increases in balances with the Reserve Bank by $383.4 million and investments by $170.7 million.
The decrease in balances due from banks by $172.9 million partially offset the overall increase in total assets.

The lending book of the commercial banks, however, declined slightly by 0.6 percent over the year to $7.3 billion as at 30 June 2020 compared to the 7.0 percent growth noted last year.

The annual movement was reflective of the effect of the pandemic on the Fijian economy.
Lending to private individuals and non-residents sectors were the only increases recorded for the year ended 30 June 2020 by $33.1 million and $14.5 million respectively, whilst all the other sectors declined.

This is compared to the growth in lending to the private sector business entities (by $396.0m) and private individuals (by $87.6m), recorded in 2019.
Private individuals continued to account for the majority of the commercial banks’ lending portfolio at 29.4 percent, followed by wholesale, retail, hotels and restaurant (19.7%), real estate (17.5%), building and construction (9.4%) and manufacturing (6.6%).

Commercial banks’ deposits increased by 4.6 percent over the year to $8.3 billion as at 30 June 2020.
The growth was underpinned by demand deposits which grew by $584.5 million, while time and savings deposits declined by $216.8 million and $4.4 million, respectively.
As at 30 June 2020, all commercial Gross Assets of the Financial System ($ Million) Commercial Banks’ Assets Regulated Financial Entities Commercial Banks Credit Institutions Insurance Companies FNPF Insurance Brokers Capital Markets1 Total Non-Regulated Financial Entities Non-Bank Financial Institutions2 Total Total Financial System3 2016 2017 2018 Jun 2019r Dec 2019 Jun 2020p Fixed Assets Investments Other Assets Balances due from Banks Loans, Lease and Advances n o i l l i M $ 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2017 2018 Jun 2019 Dec 2019 Jun 2020p 17,447 19,401 20,739 21,466 22,518 22,828 Source: Reserve Bank of Fiji 1 Includes MIS, SPX and Stock Brokers.
2 Includes Fiji Development Bank (FDB) and Housing Authority of Fiji (HA).

3 Excludes RBF.

Source: Reserve Bank of Fiji Composition of the Capital Markets ($ Million) 2016 2017 2018 Equities Market1 1,319 1,797 3,070 Managed Investment Schemes2 227 271 353 Jun 2019r 3,638 378 Dec 2019 4,119 422 Jun 2020p 3,405 368 Bonds Market3 3,387 3,636 4,014 4,275 4,289 4,915 1 Based on the market capitalisation of the listed companies.

2 Based on the funds under management.

3 Based on outstanding bonds.


Source: Reserve Bank of Fiji Components of Deposits Demand Deposits Time Deposits Savings Deposits n o i l l i M $ 6,000 5,000 4,000 3,000 2,000 1,000 0 2017 2018 Jun 2019 Dec 2019 Jun 2020p Source: Reserve Bank of Fiji Reserve Bank of Fiji Annual Report 31 Reserve Bank of Fiji Annual Report banks complied with the minimum capital adequacy requirement of 12.0 percent, reporting a combined capital adequacy ratio of 18.7 percent.
Classified exposures of commercial banks deteriorated by 44.8 percent to $299.2 million resulting in a notable increase in the classified exposure to gross loans ratio from 2.8 percent in 2019 to 4.1 percent as at 30 June 2020.

The outcome was mainly attributed to the pandemic which had affected the repayment capability of borrowers in particular over the six months to 30 June 2020. economic forecast and the impending increase in credit risk inherent in their respective loan books.
Overall, specific provisions were adequate to cover 39.4 percent of classified exposures.

In addition, the general reserves for credit losses (GRCL) represented 1.4 percent (2019: 0.9%) of net loans.

Total past dues increased by 42.7 percent to $462.7 million, compared to a 1.0 percent growth in 2019 to $324.2 million.

The one to three months category accounted for 59.6 percent of total past dues.

Similar to 2019, specific provisions increased by a higher margin ($36.4m) over the year to $117.9 million.
The growth is reflective of the commercial banks’ International Financial Reporting Standards 9 provisioning models in line with the Problem loans were concentrated in the private individuals (30.1%), wholesale, retail, hotels and restaurants (16.5%), real estate (15.1%), transport and storage (12.6%), manufacturing (9.8%) and building and construction (9.5%) sectors.
Commercial banks’ soundness is threatened by the likelihood that there will be a continuous sharp increase in non-performing loans if the pandemic endures, from the already high levels as at 30 June 2020.

Borrowers across all sectors and scales of business have been affected, as declines in income and revenue means that customers are unable to service their loans and make repayments.
Consequently, banks will have to continuously monitor their non-performing loans and make prudent decisions on their current and future provisioning levels.

Net profit before-tax for commercial banks for the first six months of 2020 stood at $47.1 million.
The annualised return on equity (ROE) ratio fell to 5.3 percent from 14.9 Summary of Commercial Banks’ Profitability ($ Million) 235.6 82.9 152.7 97.2 35.1 7.6 32.3 22.2 249.9 133.0 69.8 47.1 11.4 35.7 0.0 35.7 Dec 20191 Jun 2020p2 Interest Income Interest Expense Net Interest Income Add: Non Interest Income: Income from Overseas Exchange Transactions Commission Fee Charges Other Income Total Operating Income Less: Operating Expenses Less: Bad debts and Provisions Profit Before-Tax and Extraordinary Items Jun 2019r2 219.2 82.3 136.9 119.7 46.8 8.8 42.0 22.0 256.6 122.8 14.6 462.9 177.6 285.3 249.2 96.5 17.6 86.2 48.9 534.5 254.1 21.1 204.8 217.4 250.3 119.2 259.3 Less: Tax 44.2 46.4 47.0 Net Profit After-Tax 160.6 171.0 203.3 Add/Less: Extraordinary Items 0.0 0.0 0.0 Net Profit After-Tax and Extraordinary items 160.6 171.0 203.3 27.0 92.1 0.0 92.1 52.6 206.7 0.0 206.7 Average Assets 8,446.7 9,148.4 9,569.0 9,741.5 10,156.2 10,208.8 After-Tax Return on Equity (%) Efficiency (%) Yield on Earning Assets (%) Cost of Funding Liabilities (%) 18.4 51.1 4.8 1.3 17.7 50.3 4.8 1.6 19.2 50.2 4.9 1.7 14.9 47.9 2.5 1.0 15.8 47.5 5.2 2.0 5.3 53.2 2.6 1.0 1 Calendar year profits for all commercial banks used.
2 6 months profits for all commercial banks used.
Source: Reserve Bank of Fiji 32 Reserve Bank of Fiji Annual Report 4.0% Commercial Banks' Assets 18.7% Capital adequacy ratio of commercial banks as at 30 June 2020 Asset Quality Total Past Due Classified Exposures Impaired Assets Classified as % of Lending n o i l l i M $ 500 450 400 350 300 250 200 150 100 50 0 2017 2018 Jun 2019 Dec 2019 Jun 2020p Source: Reserve Bank of Fiji t n e c r e P 8 7 6 5 4 3 2 1 0 Reserve Bank of Fiji Annual Report 33 percent in 2019.
The efficiency ratio increased to 53.2 percent whilst return on assets (ROA) stood at 0.9 percent, as at 30 June 2020.

The annualised interest rate spread increased to 3.3 percent in June 2020 from 3.1 percent reported in December 2019.

This was due to decreases in both the cost of funding liabilities and the yield on earning assets.

Commercial banks’ liquidity remained marginal despite the increase in liquid assets by 19.8 percent to $2.0 billion as at 30 June 2020.
Major components of liquid assets for commercial banks were investments (29.5%), exchange settlement accounts (37.2%), deposits with banks and at call (23.0%) and cash (10.2%).

Credit Institutions Credit institutions’ capital position continued to be assessed as strong while earnings were at satisfactory levels, for the year ended 30 June 2020.

Asset quality, however, continued to be assessed as poor and liquidity levels were marginal, resulting in an overall marginal prudential assessment.
Total assets of the credit institutions grew by 13.7 percent over the year to $824.7 million as at 30 June 2020, slightly lower than the 15.4 percent growth recorded in the same period of 2019.

All categories of assets increased, with major growth in balances due from banks and loans and advances.
Lending growth remained positive for the credit institutions with loans and advances increasing by 5.7 percent to $607.1 million as at 30 June 2020, compared to an 18.7 percent increase in the same period in 2019.

Lending to private individuals recorded the highest increase of 16.9 percent to $235.0 million, while lending to private sector business entities and public enterprises declined.

Total investments of credit institutions increased by 62.1 percent to $28.5 million as at 30 June 2020.
Government bonds continued to account for the major share of investments at 99.2 percent.

Total deposits continued to grow and stood at $530.1 million as at 30 June 2020, an increase of 13.4 percent, slightly higher than the 12.6 percent growth recorded in 2019 ($467.7m).
Private individuals accounted for the majority of deposits at 36.9 percent Commercial Banks’ Profitability (% of Average Assets) Net Interest Income Charges for Bad & Doubtful Debts Non-interest Income Operating Expenses Net Profit Before-Tax Net Profit After-Tax 20161 20171 20181 3.1 0.3 2.4 2.8 2.4 1.9 2.8 0.3 2.5 2.7 2.4 1.9 2.9 0.1 2.5 2.7 2.6 2.1 Jun 2019r2 2.8 0.3 2.5 2.5 2.4 1.9 Dec 20191 Jun 2020p2 2.8 0.2 2.5 2.5 2.6 2.0 3.0 1.4 1.9 2.6 0.9 0.7 1 Calendar year profits for all commercial banks used.
2 6 months profits for all commercial banks used.
Source: Reserve Bank of Fiji Commercial Banks’ Annual Spread Credit Institutions’ Assets Fixed Assets Investments Loans, Lease and Advances Balances due from Banks Other Assets 6 5 4 3 2 1 t n e c r e P 0 2016 Yield on Earning Assets S p r e a d n o i l l i M $ Cost of Funding Liabilities 800 700 600 500 400 300 200 100 0 2017 2018 Jun 2019 Dec 2019 Jun 2020p 2017 2018 Jun 2019 Dec 2019 Jun 2020p 13.7% Credit Institutions' Total Assets 5.7% Lending by Credit Institutions 13.4% Deposits held at Credit Institutions Reserve Bank of Fiji Annual Report Source: Reserve Bank of Fiji Source: Reserve Bank of Fiji Reserve Bank of Fiji Annual Report 33 followed by private sector business entities at 28.7 percent.
The share of deposits by public enterprises and non-bank financial institutions were at 19.2 percent and 13.5 percent, respectively.

Credit institutions’ combined capital adequacy ratio stood at 21.0 percent, above the regulatory minimum requirement of 15.0 percent, as at 30 June 2020.

The pandemic had also significantly impacted the credit institutions performance over the six months to June 2020.
Classified exposures increased substantially by 63.3 percent over the year to $114.0 million (June 2019: $69.8m).

Accordingly, classified exposures to gross loans ratio rose to 18.8 percent from 12.2 percent in the prior year.

These movements were fully reflected in the past due loans which notably increased from $93.2 million over the year to $270.6 million.

the industry’s efficiency ratio at 39.4 percent.


In line with the increase in classified exposures, total specific provisions increased by $16.9 million to $38.0 million and were assessed to cover 33.3 percent of classified exposures, at the end of June 2020.

GRCL to net loans ratio slightly increased to 1.7 percent from 1.0 percent, in the prior year.
Credit institutions reported a net profit before tax of $2.9 million for the first six months of 2020, compared to $19.1 million for the six months ending 30 June 2019.

The decrease in profit was mainly due to the increase in provisions in light of the pandemic.
The annualised ROE and ROA ratios stood at 3.5 percent and 0.7 percent respectively, with The combined credit institutions’ annualised spread was at 8.8 percent in June 2020, a decrease from the 10.1 percent recorded in the same period in 2019, primarily underpinned by the decline in the yield on earning assets over the year.

Liquid assets of credit institutions increased by 47.3 percent to $166.7 million at the end of June 2020.
Balances due from banks accounted for the majority of credit institutions’ liquidity at 82.9 percent, followed by investments at 17.1 percent.

The Insurance Industry The life and general insurance sectors complied with the mandated solvency requirements and reported surpluses as at 30 June 2020.
The life and Summary of Credit Institutions’ Profitability ($ Million) Interest Income Interest Expense Net Interest Income Add: Non Interest Income Commission Fee Charges Other Income Total Operating Income Less: Operating Expenses Less: Bad debts and Provisions Profit Before-Tax Less: Tax Net Profit After-Tax Earning Assets Cost of Funds Average Assets After-Tax Return on Equity (%) Before Tax Return on Asset (%) Efficiency (%) Yield on Earning Assets (%) Cost of Funding Liabilities (%) 20161 20171 20181 Jun 20192 Dec 20191 Jun 2020p2 Total Assets of Life and General Insurance sectors 4.2% Combined Life and General Sectors’ Net Premium Income 8.0% FNPF Total Assets 1 Calendar year profits for all credit institutions used.
2 6 months profits for all credit institutions used.

Source: Reserve Bank of Fiji 34 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 35 general insurers recorded strong solvency positions of $484.9 million and $98.0 million, respectively.

The insurance industry’s assets recorded a growth of 8.5 percent over the year and stood at $1.9 billion as at 30 June 2020.

Both life and general insurers’ assets grew by 8.5 percent and stood at $1.5 billion and $422.7 million, respectively.
The increases in life insurer’s assets were underpinned by increases in Government securities, equity investments and cash on hand.

Similarly, growth in assets of general insurer’s, was attributed to increases in cash on hand and land and buildings.

The aggregate net premium income for the insurance industry grew by 4.2 percent over the year to $314.1 million for the period ended 30 June 2020.
Net premium income for life insurers’ rose by 4.4 percent while general insurers recorded an increase of 4.0 percent and stood at $151.9 million and $162.3 million, respectively.

The combined net policy payments and net claims paid by the life and general insurers totalled $219.4 million, an increase of 2.7 percent.

Net policy payments for life insurers increased by 7.8 percent to $128.1 million while general insurers, paid out $91.3 million, reflecting a decrease of 3.5 percent.
The combined insurance brokers facilitated 1,175 offshore placements worth $89.0 million for the period ending 30 June 2020 in comparison to 1,535 offshore placements worth $70.6 million during the same period last year.

Fiji National Provident Fund The FNPF’s performance for the review period was assessed as marginal with the challenging economic and uncertain investment environments.
The Fund’s solvency requirement continued to be met at 125 percent risk-based capital coverage, with positive returns on investments reported for the review period.

As the largest financial institution and the only superannuation fund in Fiji, the Fund’s assets accounted for 35.7 percent (or $8.1b) of total financial system assets as at 30 June 2020.
The increase in FNPF assets from $7.5 billion in June 2019 is mostly attributed to the 8.6 percent ($597.8m) expansion in its investment portfolio to $7.6 billion.

The growth in the investment portfolio was due to the increase in investments in Government securities and local equities.

While noting the challenging investment environment, the Fund declared an interest rate of 5.0 percent ($288.0m) for the financial year ending 30 June 2020.
This contributed to the 7.2 percent growth in member balances over the year to $6.3 billion.

Despite additional withdrawals allowed to members affected by the Coronavirus, the Fund reported positive net contributions of $142.3 million, as at June 2020.

The Fund also faced the critical challenge of striking a balance between assisting members during the crisis and meeting its core objective of ensuring that members have a meaningful income when they reach retirement.
In partnership with the Government, the Fund implemented COVID-19 relief withdrawal packages for members and employers, including the provision of early retirement assistance to members affected and the reduction in employer and employee contributions to 5.0 percent from 10.0 percent and 8.0 percent, respectively.
In terms of supervision and in line with the pandemic induced economic environment, the Reserve Bank has more frequently undertaken offsite monitoring activities during the review period including prudential consultation meetings, offsite supervision of high-risk areas and ongoing follow-ups on actions taken by the FNPF on the recommendations of past Reserve Bank onsite examinations.
Capital Markets Industry Securities Exchange The volume and value of shares traded on the SPX increased for the year ending 30 June 2020, following the listing of Port Denarau Marina Limited in August 2019.

Furthermore, there was an additional quotation of shares by listed companies such as Fijian Holdings Limited and Kontiki Finance Limited (KFL), as part of their dividend reinvestment schemes.
In terms of market capitalisation, the decrease in share prices of eight of the 20 listed securities, coupled with the delisting of Future Forests (Fiji) Limited in February 2020, contributed to the decline in market capitalisation from $3.6 billion to $3.4 billion, as at 30 June 2020.

Consequently, the top five listed securities, in terms of market capitalisation, accounted for 71.3 percent of the stock market.
In line with the decrease in market capitalisation, the SPX Total Return Index (STRI), a measure of the stock market performance that indicates total returns, decreased by 5.9 percent from 8,527.84 to 8,026.50 as at 30 June 2020.

There were 11 special crossing transactions conducted during the review period, for nine listed securities, with a total volume of 12.3 million shares valued at $31.7 million.
Excluding these special crossing Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 35 transactions, a total of 13.7 million shares valued at $23.3 million were transacted through 3,721 trades, over the year to June 2020, compared to 8.4 million shares valued at $15.6 million through 2,420 trades for the corresponding period in 2019.

As at 30 June 2020, the average dividend yield on the listed shares fell to 1.9 percent, from 2.7 percent reported in June 2019.
Similarly, capital growth significantly decreased to 8.9 percent, compared to 46.9 percent for the same period in 2019.

The average buy-to-sell order ratio as at 30 June 2020, stood at 1:19 relative to 1:5 at the end of June 2019.

The significant increase in total shares on offer was due to the inclusion of new sell orders for multiple listed entities, such as KFL, Flour Mills of Fiji Foods Limited and Paradise Beverages (Fiji) Limited.
Managed Investment Schemes (MIS) Funds under management of the MIS industry declined by 2.6 percent (or by $9.7m) to $367.8 million as at 30 June 2020 as a result of decreases in reserves and unitholders’ funds by $5.7 million and $4.0 million, respectively.

Total investments of the MIS industry stood at $348.1 million, a significant decrease of $27.7 million from the prior year.
Listed securities continued to dominate the investment portfolio at 47.3 percent, followed by unlisted securities (23.4%), term deposits held with financial institutions (15.5%), bonds (9.3%), loans and receivables (3.8%) and property investments (0.7%).

The MIS industry reported a net profit of $21.6 million for the year ended 30 June 2020, an increase of $5.8 million from the prior year.
The increase in net profit was a result of higher investment income of $4.2 million, coupled with the decrease in investment expenses of $1.6 million.

The number of unitholders in the MIS industry grew by 10.5 percent to 41,254 as at 30 June 2020.

Private individuals comprised 74.9 percent of total unitholders, with institutions making up the remaining 25.1 percent.

Liquid assets held by the MIS industry stood at $74.8 million, a decrease of 11.5 percent over the year.
The reduction in liquid assets was mainly attributed to the decline in cash and cash equivalents by $18.5 million to $51.1 million.

Liquid assets were able to cover 30.7 percent of unitholders’ funds and 20.0 percent of total assets.

Complaints Management Complaints management and customer protection are undertaken by the Reserve Bank under its mandate to promote a sound financial structure.

Complaints that are not resolved at the LFI level may be escalated by customers to the Reserve Bank.
During the year, the Bank processed 88 complaints of which 10 were pending from the 2018-19 FY.

There were 78 new complaints received which included nine referrals from Consumer Council, Fijian Competition and Consumer Commission (FCCC) and the Office of the Attorney-General.

This is an annual decrease of 7.1 percent in complaints compared to the previous period.
Market Capitalisation SPX Total Return Index Volume and Value of Shares Traded* Volume Traded (LHS) Value Traded (RHS) n o i l l i M $ 4,250 3,850 3,450 3,050 2,650 2,250 1,850 1,450 1,050 650 0 10,000 9,000 8,000 7,000 6,000 5,000 x e d n I 4,000 3,000 2,000 1,000 0 n o i l l i M 16 14 12 10 8 6 4 2 0 25 20 15 10 n o i l l i M $ 5 0 2017 2018 Jun 2019 Dec 2019 Jun 2020 2017 2018 Jun 2019 Dec 2019 Jun 2020 Source: South Pacific Stock Exchange Source: South Pacific Stock Exchange 2017 2018 Jun 2019 Dec 2019 Jun 2020 * This graph excludes special crossing transactions.
Source: South Pacific Stock Exchange 36 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 37 During the review year, 75 complaints were resolved and 13 are pending and awaiting either further action from the LFI or additional information from the complainants.

A total of 21 queries requesting information and assistance with exchange control and other banking processes were also received and immediately assisted.
The majority of the complaints received in the period related to the commercial banks and insurance companies.

In the banking and credit institutions sectors, the complaints related mainly to lending and mortgage matters and in the insurance sector, most complaints were related to motor vehicle claims.

To address the complaints received, the Bank held 78 meetings with complainants, LFIs and other partner organisations.
The Complaints Management Forum met once during the year to discuss consumerism and market conduct issues at an industry level.

Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 37 CURRENCY Under section 4(a) of the Reserve Bank Act (1983), the Bank is charged with regulating the issue of currency in Fiji.

The RBF is responsible for maintaining an adequate supply of quality notes and coins in circulation.
It issues notes and coins that are commensurate with demand for payment purposes and redeems any notes or coins that are mutilated or no longer fit for circulation and destroys them accordingly.

The Bank also determines the denomination and design of Fiji’s notes and coins, subject to the approval of the Minister for Economy.

Currency in Circulation As at 31 July 2020, total currency in circulation was $870.7 million compared to $852.2 million a year ago.
The value of notes in circulation increased by 2.1 percent to $804.0 million during the FY with the $5, $10 & $50 denominations being the highest circulated notes.

The value of coins in circulation increased by 3.6 percent to $66.7 million during the financial year.

The $1 and $2 coins registered a growth of 3.7 percent to $16.9 million and 5.0 percent to $19.0 million, respectively.

The 5-cent coin accounted for the highest volume of coins in circulation.
The Bank continued to accept demonetised currency in circulation from the general public.

Pre-decimal currency comprising pounds, shillings and pence issued before 1969 were also received from the public.
Notes and Coins in Circulation ($ Million) Notes in Circulation Denomination Jul 2018 Jul 2019 Jul Coins in Circulation Jul 2018 Jul 2019 Jul 2020 2.1% Value of notes in circulation 3.6% Value of coins in circulation 50c $1 $2 $5 $7 $10 $20 $50 $100 Pre-decimal Currency Total Denomination 1c 2c 5c 10c 20c 50c $1 $2 Pre-decimal Currency Total Notes Coins Currency in Circulation Source: Reserve Bank of Fiji 38 Reserve Bank of Fiji Annual Report Jul 2018 Jul 2019 Jul 2020 776.6 60.8 837.4 787.8 64.4 852.2 804.0 66.7 870.7 Notes Issued from Aug 2019–Jul 2020 (Total Value: $972.0 Million) $5 | 1% $10 | 6% $100 | 25% $20 | 14% Source: Reserve Bank of Fiji $50 | 54% Notes & Coins in Circulation Reserve Bank of Fiji Annual Report 39 Cost of Currency For the financial year ending 31 July 2020, the cost of currency issued by the Bank increased by 13.2 percent to $4.3 million.
Banking Transactions For the FY ended 31 July 2020, the value of currency issued to commercial banks was $976.1million, of which $972.0 million was in notes and $4.1 million in coins.

The $50 notes issued were the highest in value driven by their increasing usage in ATMs.

The $1 and $2 coins continued to be the highest value of coin denominations in circulation, reflecting the shift in public demand from low to high-value coins.
Note Processing The purpose of the note processing operation is to ensure that quality notes are in circulation.

All notes returned to the Bank through commercial banks and the general public are processed and sorted for fitness by a note processing machine.

Mutilated and Old Design Currency Assessments A total of $0.3 million in mutilated and old design currency was reimbursed to commercial banks, businesses and individuals during the review period.
Counterfeit Notes The volume of counterfeit notes discovered during the FY was negligible, at less than 0.1 percent the value of total currency in circulation.

For the financial year ending 31 July 2020, 26.8 million returned notes were processed, of which 3.1 million pieces were deemed fit for reissue while the balance was considered unfit and subsequently destroyed.

In its effort to address counterfeiting, the Bank continued to assist the Fiji Police Force with relevant investigations.
The Bank also distributed awareness materials to various organisations, schools and Cost of Currency Issued ($ Million) Notes Coins Total Source: Reserve Bank of Fiji Notes Processed Notes Processed Notes Saved for Reissue Notes Destroyed Total Processed Source: Reserve Bank of Fiji Counterfeit Note Summary Denomination $5 $7 $10 $20 $50 $100 Total Source: Reserve Bank of Fiji Aug 2017- Jul 2018 Aug 2018- Jul 2019 Aug 2019- Jul 2020 2.7 1.1 3.8 3.1 0.7 3.8 3.8 0.5 4.3 13.2% Cost of currency issued by RBF Aug 2018-Jul 2019 Aug 2019-Jul 2020 Value ($ Million) Pieces (Million) Value ($ Million) Pieces (Million) 438.0 712.2 1,150.2 7.4 22.9 30.3 171.5 772.1 943.6 3.1 23.7 26.8 28.6m Notes processed during the 2019-20 FY Coins Issued from Aug 2019–Jul 2020 (Total Value: $4.1 Million) Aug 2018-Jul 2019 Aug 2019-Jul 2020 Value ($) - - 30 160 900 900 1,990 Number of Notes Value ($) Number of Notes - - 3 8 18 9 38 - - 30 80 1550 1,100 2,760 - - 3 4 31 11 49 5c | 5% 10c | 5% 20c | 7% 50c | 10% $2 | 46% Source: Reserve Bank of Fiji $1 | 27% Reserve Bank of Fiji Annual Report 39 Reserve Bank of Fiji Annual Report the general public.
Numismatics Numismatic or “collector” currency income for the FY ending 31 July 2020 was $1.4 million.

The sale of existing gold, silver and coloured coins, single, pairs and uncut note sheets including other collectible items continued during the year.

The Bank also signed a number of agreements with partner mints for various new programmes.
40 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 41 PAYMENT AND SETTLEMENT SYSTEMS Payment and Settlement Systems are critically important in maintaining financial stability and monetary policy.

The Bank provided effective oversight of Fiji’s systemically important payment system, FIJICLEAR, through the year.

It also ensured there was adequate liquidity within the payment system to ensure settlement was reached with finality.
The Reserve Bank continued to facilitate the adoption of digital modes of payments in the country.

FIJICLEAR FIJICLEAR assures final and risk-free settlement and offers an efficient mode for financial institutions to meet their payment obligations.

All commercial banks in Fiji use FIJICLEAR to settle their interbank and customer payments.

The system continued to operate efficiently with increases recorded in activity over the year.
There were 149,940 transactions valued at $161.4 billion recorded during the financial year.

The growth in activity, as highlighted in the graph above, reflects commercial banks’ dependence and trust in FIJICLEAR.

The monthly averages for FIJICLEAR operations saw an increase in both gross value and volume.
Settlements The Payment and Settlement Systems Unit plays a supportive and critical role to the reserves management function of the Bank by facilitating the accurate and timely settlement of all foreign currency trade obligations undertaken by the RBF.

The Bank also provides correspondent banking services to regional and supranational institutions and central banks who maintain a Fiji Dollar-denominated account with the Reserve Bank.
It also accounts for all foreign currency trades into the Hi- Portfolio Investment System.

The Bank also keeps abreast of developments within SWIFT, a secure messaging system used globally to send all financial transactional instructions to our foreign and domestic counterparties.
Mobile Payments Mobile Money services through Fiji’s two Mobile Network Operators, Vodafone Fiji Limited (Vodafone) and Digicel Fiji, continued to provide an alternative electronic payment platform for retail users and mobile phone subscribers.
Vodafone’s M-PAiSA and Digicel’s Mobile Money offer a convenient and secure method of topping up airtime credit, purchasing internet data, paying for bills and transferring money within the mobile money platform and activity within these categories grew during the year.
These payment channels proved convenient during the COVID-19 lockdown periods and remittances through the mobile money channel increased immediately FIJICLEAR Transactions Monthly Average FIJICLEAR Transactions Gross Payments (LHS) Number of Transactions (RHS) Monthly Average 2015 Jan-Jul 2016 Aug 2016- Jul 2017 Aug 2017- Jul 2018 Aug 2018- Jul 2019 Aug 2019- Jul 2020 Gross Payments ($M) 8,395 8,927 8,793 9,455 11,900 13,450 Number of Transactions Source: Reserve Bank of Fiji 9,144 9,336 10,019 11,015 12,297 12,495 n o i l l i B $ 180 160 140 120 100 80 60 40 20 0 Jan-Jul 2016 Aug 17- July18 Aug 19- July20 Source: Reserve Bank of Fiji 160 140 120 100 80 60 40 20 0 ) 0 0 0 ' ( r e b m u N Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 41 41 following the onset of the pandemic and nationwide lockdown as well as into the transitioning period that followed.
Mobile Money Development Under its financial inclusion programme and to promote the adoption of more efficient payment and settlement systems, the Reserve Bank continued with its offsite monitoring and advocacy for mobile money development.

Fiji's two MNOs, Vodafone Fiji Limited (Vodafone) and Digicel Fiji, continued to provide mobile money services during the year.
Highlights in key mobile money indicators are as follows: • Overall, the total value of electronic money in circulation noted a decline of 2.8 percent to $30.8 million at the end of July 2020 which is consistent with the dampening impact of the pandemic on the overall performance of mobile money services nation-wide.

• There were 282 registered mobile money active agents around Fiji, a decline of about 37.3 percent compared to the end of the last review period.
The weak outturn is mainly due to cash-flow issues faced by many agents, especially during the COVID-19 situation, which heavily impacted sales, revenue as well as agent performance.

the slump in business and job losses impacted demand from commuters.

• As at July 2020, there have been 589,952 person-to- person (P2P) transfers valued at $58.2 million since the launch of Mobile Money in June 2010.
Notably, the value of P2P transfers has increased significantly by 113.6 percent to $25.4 million in the review period.

Similarly, the number of P2P transfers notably increased by 119.6 percent to 257,261 transactions.

• The eTransport, which uses Vodafone’s M-PAiSA platform, continued to facilitate e-money circulation for both mobile money and eTransport services.
For the 12 months ending 30 June 2020, there were 1.6 million cards issued, recording around 9.9 million top-up transactions worth $72.3 million.

When compared to the same period ending 30 June 2019, the number and value of top-up transactions declined by 40.0 percent and 41.0 percent, respectively.
The declines reflect the impact of the pandemic in 2020 as lockdowns, social gathering restrictions, school closures, Inward Remittances through Mobile Money The COVID-19 pandemic and the associated physical distancing restrictions and lockdowns have led to a significant growth in the use of digital financial services, particularly for remittances through digital channels.

In the six months to January 2020, the value of inward remittances through mobile money averaged $1.8 million a month.
In the six months following this period, remittances averaged $5.3 million and peaked at $8.1 million in the month of July 2020 alone, the highest since mobile money inward remittance channels were introduced.

As at 31 July 2020, the total number of inward remittance transactions recorded had increased by 160.6 percent to 143,848 while the total value registered an increase of 160.6 percent to $42.7 million.
The observed pandemic-induced boost to this service represents both a historic and promising development in advancing the uptake of these digital channels for remittances.
42 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 43 MISSION PLAY AN INFLUENTIAL ROLE IN THE DEVELOPMENT OF THE ECONOMY In addition to its core functions of conducting monetary policy, ensuring financial stability and the issue of currency, the Reserve Bank also implements various initiatives to develop the economy.
Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 43 43 Finance Facilities available at the RBF Import Substitution and Export Finance Facility In response to the economic challenges of COVID-19 and the consequent increase in demand from affected eligible businesses, the Reserve Bank increased the total lending allocation under ISEFF from $200 million to $300 million.
During the year, the Reserve Bank continued to provide concessional funding towards exports, import substitution, public transportation and renewable energy projects.

The scale of operations under the facility continued to expand, which resulted in 34 business loans advanced during the year with a sum of $64.2 million compared to 22 business loans with a total value of $47.7 million in the previous year.
The largest number of approved loans was made to the manufacturing sector, followed by the agriculture, public transportation and renewable energy sectors.
As at 31 July 2020, total outstanding loans under the facility was $133.6 million against the total allocation of $300.0 million in ISEFF Outstanding Loans by Sector as at 31 July 2020 Renewable Energy 36% Timber 1% Public Transportation 4% Agriculture 13% Manufacturing 46% Outstanding Loans: $133.9 Million Approved Loans Pending Drawdown: $67.5 Million Source: Reserve Bank of Fiji comparison to $103.5 million against an allocation of $200.0 million at the end of the previous financial year.
credit guarantee compared with the previous limit of $500,000.

Micro, Small and Medium Enterprises Credit Guarantee Scheme (MSMECGS) As part of its ongoing efforts to help small businesses during the pandemic and promote inclusiveness, the Fijian Government enhanced its Credit Guarantee Scheme to increase coverage and renamed the facility as the MSMECGS.
As part of the changes, Government now guarantees to pay 60 percent of the principal outstanding on defaulted micro, small and medium business loans up to a limit of $60,000 per business.
In addition, to encourage women participation in business and to support the development of the agriculture, fisheries and the forestry sectors, Government guarantees to pay 75 percent of the principal outstanding on defaulted loans up to a limit of $75,000 per business on related loans to women entrepreneurs, as well as the agriculture, forestry and fisheries sectors.
Businesses with an annual turnover of up to $1.25 million will now be able to enjoy the At the end of July 2020, a total of 478 business loans valued at $34.6 million were covered under the Scheme.

From these registered loans, the Reserve Bank has paid out loss claims totalling $0.26 million on 18 defaulted business loans.

Of this total, $0.16 million on 12 loans was paid out in 2019-20 FY, up from $0.01 million for two defaulted loans in the previous year.
The Reserve Bank continued to administer the MSMECGS on behalf of the Government since the inception of the scheme in 2012.

Disaster Rehabilitation and Containment Facility As part of RBF financial measures to support local businesses and minimise any long term damage to the economy, the RBF re- activated the Natural Disaster and Rehabilitation Facility and expanded the coverage to include businesses affected by health epidemics or pandemics such as the Coronavirus.
With the enhancement and renaming of the facility as the DRCF, there was noticeable interest from the $64.2m Advanced to 34 businesses under ISEFF $83.7m 24 applications approved under the DRCF $34.6m 478 business loans covered under the MSMECGS $17.6m 195 low-income households accessed the Housing Facility 44 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 45 business community resulting in the processing of more applications and disbursements of funds.
A total of 21 applications ($83.4 million) was approved during the year while there were no applications received in the previous year.

Of these approvals, a total of $4.6 million is awaiting instructions for the drawdown of funds.

At the end of the financial year, total outstanding loans under the facility was $92.9 million against the total allocation of $100.0 million, an increase from $14.3 million against an allocation of $40.0 million in the previous fiscal year.
Housing Facility The RBF continued to provide concessional funding under the Housing Facility for low-income earners.

During the review year, a total of 195 low-income households were able to purchase or build their first homes at a total value of $17.6 million under the scheme.

Since the inception of the facility, a total of $58.8 million against the allocation of $100 million has been advanced to 1,007 households to build or purchase their new homes.
Secondary and Retail Bond Market The appetite from retail investors for Viti bonds was strong during the 2019-20 FY resulting in the full subscription of the $10 million allocation for the first time since 2012.

The outstanding value of Viti bonds at the end of July 2020 stands at $56.2 million for 435 investors.

On the secondary market, the Reserve Bank purchases of Viti bonds were the only activities recorded in the review period.
There were purchases of 71 parcels of Viti bonds valued at $0.9 million, compared to purchases of 101 parcels of Viti bonds valued at $1.7 million in the previous year.

Financial System Developement Secured Transactions Reform The secured transactions reform continued to progress in the review year.

Milestones achieved include the successful completion of the 180-day transition period which ended on 27 November 2019.

This period allowed lenders to migrate their existing security interests into the FPPSR.
After the transition period, the number of filings stood at 49,436.

The Reserve Bank continued its awareness and presentations to various business houses and forums on the key implications of the Personal Property Securities Act 2017 and the workings of the PPSR.

The awareness will continue in the new financial year.

The PPSR operated seamlessly throughout the COVID-19 period, especially during the lockdown of the Suva area.
As expected, a decline was noted in the numbers of filings, but clients were still able to register filings and the public could conduct searches on the registry.

As at 31 July 2020, the PPSR has recorded more than 60,000 filings from all six commercial banks, four credit institutions, 12 non-bank financial institutions, four car dealers, four hire-purchase companies and 42 law firms.
Micro, Small and Medium Enterprises (MSME) Development In an effort to improve MSME access to finance, the Reserve Bank continued to collaborate with the Ministry of Commerce, Trade, Tourism and Transport (MCTTT) to provide support towards the development of the MSME sector through the MSME Technical Working Group (TWG) as required under Pillar 6 the RBF Financial Sector Development Plan 2016-2025.
The MSME TWG met three times over the year and discussions included finalising the setup of MSME Fiji – a MSME-dedicated division within the Ministry.

MSME Fiji was officially established in December 2019 and is responsible for developing and administering Government’s MSME-related national initiatives include providing business advisory services and undertaking training and capacity building programmes.
The new financial year presents an even more crucial time to stimulate the MSME sector to help with economic recovery.

The Reserve Bank will continue to provide support to MSME Fiji and the Ministry in this regard.

Financial Inclusion Throughout the year the Bank engaged with the Alliance for Financial Inclusion (AFI) on a number of activities, training webinars and working group discussions to further the financial inclusion agenda of the Bank and the RBF’s international commitments in this area.
Commitments at a regional level towards increasing digital financial services, ensuring gender inclusive finance and the development of green financial products and services formed an integral part of the Banks’ broader financial inclusion agenda.

During the year, the Bank contributed to various projects through AFI’s eight working groups.
These included a Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 45 number of upcoming and published knowledge products such as a Complaint Handling in Central Bank Framework; Experiences in the Implementation of the Principle of Disclosure and Transparency in AFI Member Countries – Series 1: Credit Products; Sustainable Development Goals and Socially Responsible Finance – Case Studies from Selected AFI Members; Inclusive Green Finance: A Survey of the Policy Landscape; Policy Framework for Women’s Financial Inclusion Using Digital Financial Services and a Policy Model for E-Money.
National Financial Inclusion Taskforce (NFIT) The work of the NFIT is guided by the National Financial Inclusion Strategic Plan 2016-2020.

Financial inclusion efforts were challenged in early 2020 due to the global pandemic which affected and continues to affect many households, particularly the low- income earners and the MSMEs.

The iTaukei financial literacy programme, Noda i Lavo, aired on Fiji Broadcasting Corporation TV and hosted by Tevita Gade of the RBF, has completed three seasons.
The programme features partner stakeholders as guests discussing financial products or sharing their experiences on how they have benefited from making prudent financial decisions.

The airing of Season 4 commenced on 21 July 2020.

The programme continues to receive positive feedback.

Teachers’ Association Conference in Suva.

Approximately 700 head teachers were present during the Awards, where four primary schools and four teachers from Central, Northern, Western and Eastern Divisions received Awards.
As at 31 December 2019, 76.8 percent of the adult population were formally served by a financial institution, gradually increasing by an average of 2.8 percent over the past four years.

In addition, all urban and the majority of rural tikinas (89.5%) had access to at least one financial access point.

Those tikinas with no access point have relatively weak to no mobile coverage.
Financial Services Disaggregated Data The Reserve Bank’s Financial Sector Development Policy Statement on the Minimum Requirements for the Provision of Disaggregated Data was implemented on 1 June 2019.
Under the policy, regulated and supervised financial service providers (FSPs) are required to provide disaggregated data by gender, age and location for bank account ownership (depositors & borrowers), mobile money wallet ownership, insurance policyholders, superannuation members, remittance recipients – both local and international, e-channel registered customers, non-bank financial institutions customers (depositors & borrowers), capital markets investors and micro, small and medium enterprises (depositors & borrowers).
In partnership with Pacific Financial Inclusion Programme (PFIP), the RBF continued to recognise and reward teachers and schools for creative approaches and initiatives in teaching Financial Education (FinEd) through the annual FinEd Innovation Awards.

This was held at the Fiji Head Between September 2019 and July 2020, the RBF received datasets for the 2018 and 2019 periods from 33 and 34 of the 35 FSPs, respectively.
The RBF continues to work with financial industry players to improve data collection under the newly introduced policy and analyse submissions to assist stakeholders formulate evidence-based financial inclusion interventions.

Capital Markets Advisory and Development Taskforce (CMADT) The CMADT held two meetings during the review period concentrated in the first half of the year.

There were no meetings held in the latter part of 2019-20 FY due to COVID-19 restrictions.
During the review period, the following key developments were noted: • Fiji was scheduled to host the next World Exchange Congress in June 2020.

The annual event brings together representatives from the stock, commodity and energy exchanges, clearing and settlement houses, regulators, capital market authorities and digital technology solution providers.
The 2020 event had registered more than 500 participants and 120 confirmed speakers focusing on new technology, new customers, new revenue streams, exchange evolution, regional collaboration and cyber security.

However, due to the global impact of the Corovirus, the event was postponed to a later date.

• The Taskforce also looked at the challenges faced by the Capital Markets intermediaries in implementing AML/CFT requirements.
An Industry Forum was convened in September 2019 to gather specific issues and challenges from the experiences of the industry.

An important 46 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 47 outcome of the Forum was the need to understand the processes in place for resident and non-resident investors by the financial institutions and Government agencies such as FRCS and Investment Fiji.
Further discussions with the regulators pointed at the need for a more facilitative environment, frequent interactions between the supervisor and the industry and regular training of the customer service officers.

• The Private Sector Development Initiative, a private arm of the ADB, made a presentation to the Taskforce on alternative financing opportunities for Fiji and the beneficial impact of an enabling legal framework on small and medium enterprises faced with capital raising constraints.
Taskforce members deliberated the legal avenues within the Fijian context that could be considered in order to facilitate capital-raising through such platforms and agreed to collaborate with Government on a way forward.

• Work on developing Fiji’s corporate debt market continued with the IFC for the drafting of the regulatory framework that would enable large corporations to issue bonds.
An industry consultation was conducted in November 2019 with key stakeholders from the financial markets, legal, accounting and auditing firms, the FRCS and Government.

The consultations centred the discussions on eligible investors, key obligations of issuers and specific legislative and regulatory avenues through which an issuance would be viable.
Following the consultations, a draft Companies (Wholesale Corporate Bonds) Regulations was developed and discussed with stakeholders and is scheduled to be vetted for approval by Government in the second half of 2020.

• Bond issuances in Fiji are subject to the requirements in the Companies Act 2015, which requires that companies that wish to conduct an offer to enter into a trust deed and appoint a trustee.
In this regard, a bond trustee licensing framework was developed and approved by the Reserve Bank in October 2019.

Regulatory Sandbox Guideline On 31 December 2019, the Reserve Bank launched its FinTech Regulatory Sandbox Guideline, a framework which aims to foster the responsible development of innovative solutions in Fiji’s financial sector.
Specifically, the regulatory sandbox provides an innovative and safe space that facilitates controlled live tests of new financial products and services prior to commercial deployment.
The launch was a culmination of development work which the RBF embarked on in May 2017 when it publicly announced its intention to issue guidelines, reaffirming its support for financial innovation and responding to a growth in interest to introduce new types of financial solutions that aim to address various inefficiencies in the financial system.
Like many financial regulators around the world, the Reserve Bank is continuously challenged with responding to new and innovative financial products, services and processes.

The Guidelines recognise the need to evolve regulation that enables genuinely beneficial innovation while simultaneously responding to new risks emerging from more sophisticated solutions.
As such, the Guideline adopts a number of key design principles such as requiring prospective participants to incorporate adequate risk management, consumer protection and redressal frameworks, in addition to the test parameters that will be in place to control and contain potential risks specific to the nature of solutions.
Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 47 47 RBF IN THE COMMUNITY The Bank as a responsible corporate body remains committed to ensuring it Participation in the Community Some members of Team RBF served on Governor and senior staff regularly gave presentations on the latest economic gives back to the community whether boards and committees set up by the developments to Government, businesses, through the Bank’s annual corporate Government, international institutions, industry groups, community groups and donations, participation in the community, regional organisations school committees, educational institutions.
The Bank also policy initiatives or staff involvement in charitable organisations and professional makes available information on its website community projects.

bodies.

Staff members were judges and Facebook page, including the NFIT for Investment Fiji’s Prime Minister’s and PPSR websites that users can easily Corporate Donations to Organisations The following charitable organisations International Business Award as well as access.

FDB Small Business and SPX Awards.


received contributions of $1,000 each In support of SMEs, the Reserve To create awareness of RBF operations, the Bank participated in interviews and from the Bank in December 2019: - Bank sponsors the Services Award talkback radio shows in Hindi and English.

• Suva Special Education School for the FDB SME Awards.
The Bank The Bank also featured in a financial • Fiji Crippled Children’s Society also sponsors Investment Fiji’s Prime literacy programme in the iTaukei language • St. Christopher’s Home • Dilkusha Orphanage • Fiji Disabled People’s Association • Fiji Society for the Blind • Father Law Home • Salvation Army • Homes of Hope • Foundation for the Education of Needy Children (Fiji) – FENC Fiji Community Outreach Various donations were made by Quality Management Teams (QMT) and staff to families and individuals in need.
o Groceries for some families o Visiting the sick with food items and cash contribution o Cash contribution for medical treatment o Contribution towards food parcels to needy families during Diwali and Christmas through Rotary o Cash donation to Fiji Cancer Society for WOWS The Bank also donated food and clothing towards efforts to rehabilitate rural areas after Tropical Cyclone Harold.

Minister’s International Business Award for by hosting the Noda i Lavo programme Agriculture.
which recorded its fourth season in 2019.

The Bank continued to benchmark itself The Bank’s Sports and Social Club also against similar institutions and participated organised social events and cultural in the SPX Annual Report Competition in activities such as Diwali, Eid, Chinese New the August 2018-July 2019 Report.

Year and Sports Day for staff.

The Bank The Governors and senior staff made presentations and submissions to the also participated in sports organised by business houses.
Parliamentary Standing Committees on a number of occasions.

Presentation on the School Visits to the Bank Every year the Bank facilitates sessions 2019 Insurance Annual Report was made where school students, get to learn the to the Standing Committee on Economic operations of a central bank.

The visit Affairs on 16 January and tabled in ends with a question and answer session Parliament on 4 September 2020. and tour to the Bank’s numismatic centre.
Four schools visited the Bank: Namosi District School, Viro District School, Burenitu Village School and International School.

The students also get to meet and network with their school alumni working in the Bank.

In its efforts to build relationships across a broad spectrum of the community and gain first-hand insight into developments across the country, the Bank continues to devote resources to industry visits and meetings.

The Board Directors also accompany Bank officials on some visits.
The Bank participated in the activities of the Fiji Institute of Bankers (FIB).

In an effort to keep the public informed of its assessment of the economy, the 48 Reserve Bank of Fiji Annual Report 48 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 49 MISSION PROVIDE PROACTIVE AND SOUND ADVICE TO GOVERNMENT Policy advice to Government is provided in many ways.
During the 2019-20 FY, the Governor met with Government officials on a number of occasions to discuss issues pertaining to the economy.

The RBF also accompanied Government officials on visits and consultations abroad.

Presentations on the economy were made to Ministries and other Government agencies, as and when requested.
Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 49 49 Policy Coordination Policy formulation is critical to the effectiveness of Government’s macroeconomic management, therefore, must be appropriately undertaken by relevant economic policymaking agencies.

RBF continued to provide relevant advice to Government through its participation in various Committees during the year.
The Macroeconomic Committee (MC) and its Technical Committees prepared forecasts on Fiji’s GDP, trade and balance of payments.

These projections are critical inputs into monetary policy formulation and other national policy decision making.
The Governor continued to chair the MC, whose membership comprised officials from the Ministry of Commerce, Trade, Tourism and Transport, Fiji Bureau of Statistics, Prime Minister’s Office, Ministry of Infrastructure & Meteorological Services, FRCS, Investment Fiji and the Reserve Bank.

During the 2019- 20 FY, there were two forecasting rounds, six Macroeconomic Technical Committee meetings and two MC meetings.
As part of the macroeconomic forecasting process, the Reserve Bank met with key industry groups during the year and information gathered from these meetings formed the basis for forecasting national macroeconomic indicators, as well as providing advice to the Government through the MC reports and the 2020-21 National Budget submission.

Registry and Banking Services The Reserve Bank is the registrar for debt securities issued by Government and statutory corporations.
The registry service includes bond issuance, redemption, transfer of securities and interest payments.

As a fiscal agent, the Bank also provides banking services, such as the “lender of last resort” facilities to the Government and commercial banks.

At the end of July 2020, the RBF registry recorded a total nominal value of $4,951.4 million in bonds, compared to $4,275.5 million in the previous financial year.
For the review period, Government bonds recorded a net issuance of $710.1 million, which led to an increase in the value of outstanding bonds by 17.8 percent to $4,681.1 million.

On the contrary, the outstanding balance for statutory corporation bonds fell by a combined 11.2 percent to $270.3 million.

Total registry payments fell by 9.7 percent ($109.4m) to $1,022.0 million at the end of July 2020.
The lower payments resulted from a decrease in Treasury bills redemptions by $79.5 million to $439.5 million.

In addition, bond redemptions decreased by $50.7 million to $278.8 million.

Despite the increased demand for funds by Government, the yields tracked downwards across the maturity spectrum, especially towards the end of the year.

The decline was generally associated with the easing of monetary policy stance by the RBF and the higher level of liquidity in the system.
The Government continued to source funds through the issuance of Treasury bills to support its temporary financing needs.

For the 2019-20 FY, Government Treasury bills recorded total issues of $401.7 million and redemptions worth $439.5 million.

The outstanding Treasury bills balance at the end of July stood at $269.7 million.

Similar to the Government bonds, yields on Treasury bills also fell significantly throughout the maturity span during the year.
Outstanding Bonds as at 31 July 2020 ($ Million) Weighted Average Yields on Long-term Government Securities 2019 (July) 2020 (July) Issued Redeemed Outstanding Total Government 904.1 o/w Fiji Development Loan Bonds - o/w Fiji Infrastructure Bonds 804.1 o/w Fiji Green Bonds o/w COVID-19 Response Bonds o/w Viti Bonds FDB EFL HA FSC Total - 90 10 40.5 - 10.0 - 954.6 194.0 129.5 63.4 - - 1.1 54.5 - 5.2 25.0 278.7 4,681.1 1,415.6 3,019.3 100.0 90.0 56.2 228.8 8.0 33.5 - 4,951.4 Figures may not precisely add up to the totals due to rounding.
Source: Reserve Bank of Fiji 50 Reserve Bank of Fiji Annual Report t n e c r e P 8 7 6 5 4 3 2 1 0 Source: Reserve Bank of Fiji Maturity (years) Treasury Bills ($ Million) Aug 2016- Jul 2017 Aug 2017- Jul 2018 Aug 2018- Jul 2019 Aug 2019- Jul 2020 230.0 241.6 310.4 96.4 240.0 269.0 177.9 187.5 805.0 639.0 519.0 307.5 545.0 401.7 439.5 269.7 Flotations Allotments Redemptions Outstanding Source: Reserve Bank of Fiji Reserve Bank of Fiji Annual Report 51 RESERVE BANK OF FIJI MEDIA NOTE 01 NOVEMBER 2019 Roadshow on World’s First Regional Regulatory Sandbox Commences with Fiji Visit (From Left to Right) Mr Wameek Noor (AFI), Mr Eliki Boletawa (AFI), RBF Governor Mr Ariff Ali and Mr Adeyemi Omotoso (AFI) The Reserve Bank of Fiji (RBF), in conjunction with the Pacific Islands Regional Initiative (PIRI) and the Alliance for Financial Inclusion (AFI), hosted a consultative forum in Suva on 24-25 October for key stakeholders towards the development of a Regional Regulatory Sandbox (Regional Sandbox).
The Regional Sandbox is earmarked to be the first multijurisdictional regulatory sandbox in the world and is designed to enable and facilitate controlled testing and deployment of innovative, financial solutions within participating countries of PIRI – AFI’s initiative for its Pacific Island member countries including Papua New Guinea, Samoa, Solomon Islands, Timor-Leste, Tonga, Vanuatu and Fiji.
Fiji was the first PIRI member to be visited by AFI as part of its seven-country regional regulatory sandbox roadshow which aims to discuss and understand specific requirements for operationalising the seven-country initiative.

The AFI mission team and the RBF used the opportunity to leverage off insights into the strides that Fiji has made in the digital financial services and towards the development of a national regulatory sandbox – one of two proposed national regulatory sandboxes in the Pacific.
In his remarks during the visit by AFI, RBF Governor, Mr Ariff Ali acknowledged the role of technology in advancing inclusive development through extending essential financial services to the underserved segments of society including rural communities and micro, small and medium enterprises.

He added “The regional regulatory Sandbox is the right direction.

We need to know ourselves, so we understand the risks but also to support FinTech and innovation.
Our job is not to have bottlenecks but to find solutions.” AFI’s Head of Policy Programs and Regional Initiatives Mr Eliki Boletawa added that, “With the emergence of new, more sophisticated technologically-driven financial service solutions – regulators from developing and developed economies around the globe have moved towards introducing national regulatory sandboxes as a means of responding to associated challenges and risks.
A regional crossjurisdictional framework will enable a safe space with well-defined safeguards that is tailored to new solutions including those that assist in eliminating genuine barriers to innovation in the financial system.” Mr Shailendra Prasad of Vodafone Fiji, a participant at the forum mentioned that “a key benefit to the region is that the Regional Sandbox will present the Pacific as a single market for many innovative financial solutions that hinge on leveraging a sufficiently large population to be a viable offering.
This should encourage new entrants and provide an opportunity for existing platforms to grow even further.

At the end of the day, customers will benefit from innovation.” Additionally, central bank leaders from PIRI member countries have recognised the potential that the regional initiative has for catalysing the convergence of regulatory requirements and processes across the Pacific region.
AFI will continue its planned in-country visits across participating PIRI member countries in November as it seeks to harmonise and synthesise the processes involved in the implementation of the Regional Sandbox and identify potential sandbox participants with innovative solutions that can enhance financial inclusion.
Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 51 51 52 Reserve Bank of Fiji Annual Report 52 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 53 Financial Performance Income The Reserve Bank’s total income primarily comprises interest income from foreign currency investments and domestic securities.
For the financial year ended 31 July 2020, total income was $59.8 million led by the high foreign interest income emanating from the high yields on the foreign reserves held by the Bank.

Expenditure Total expenditure incurred during the year was $29.7 million.

Administrative spending was $20.4 million with staff costs representing the single largest operating expenditure for the Reserve Bank accounting for over 52.9 percent of total operating costs.

Other expenses for the year totalled $9.3 million.


Assets and Liabilities The Bank’s total assets stood at $3.1 billion as at 31 July 2020, representing a 14.8 percent growth due to the increase in domestic holdings.

On the liabilities side, the increase is mainly reflected in the build-up of the SRDs and currency in circulation.

Operating Profit and Payment to Government The operating profit for the year ended 31 July 2020 was $30.1 million.
The Minister for Economy approved the transfer of $1.0 million from the operating profit to the General Reserve Account.

As required under the RBF Act (1983), the balance of the operating profit was subsequently transferred to Government at the end of September.

The Act also requires the Reserve Bank to transfer one-fifth of the RRA balance to Government, which amounted to $2.7 million as at 31 July 2020.

The amount transferred from the RRA was $1.5 million in the previous financial period.
The Bank transferred $31.8 million to the Government for the year ended 31 July 2020 compared to the $29.4 million paid for the year ended 31 July 2019.

Publications and Press Releases Disseminating timely and quality information is one of the missions of the RBF.

Communication, therefore, is considered an essential aspect of the Bank’s operations.
The Corporate Communications function coordinates internal and external communications by the Bank through publications, press releases, media notes, website management, responses to external enquiries and media relations.

Publications by the Bank are through annual reports, financial stability reports, quarterly reviews, economic reviews and development plans regarding the Bank’s developmental role.
During the year, the Bank released the August 2018-July 2019 RBF Annual Report and the 2019 Insurance Annual Report, after both reports were tabled in Parliament on 17 February and 4 September 2020, RBF Foreign and Domestic Income ($ Million) Total Income and Total Expenses Aug 2016- Jul 2017 Aug 2017- Jul 2018 Aug 2018- Jul 2019 Aug 2019- Jul 2020 Income Expenditure Foreign Interest Income Domestic Interest Income Other Income Total Source: Reserve Bank of Fiji 39.8 9.7 6.6 56.1 44.8 9.7 5.3 59.8 46.6 10.2 4.4 61.2 38.6 16.1 5.1 59.8 Reserve Bank’s Profit Payable to Government ($ Million) Operating Profit Less Transfer to General Reserves Balance Paid to Government One-fifth of RRA Total Paid to Government Source: Reserve Bank of Fiji Jan-Jul 2017 28.3 Aug 2017- Jul 2018 Aug 2018- Jul 2019 Aug 2019- Jul 2020 31.5 28.9 30.1 1.0 27.3 2.1 29.4 1.0 30.5 2.0 32.5 1.0 27.9 1.5 29.4 1.0 29.1 2.7 31.8 n o i l l i M $ 70 60 50 40 30 20 10 0 Jan-Jul 2016 Aug-Jul 2017 Aug-Jul 2018 Aug-Jul 2019 Aug-Jul 2020 Source: Reserve Bank of Fiji Reserve Bank of Fiji Annual Report 53 Reserve Bank of Fiji Annual Report respectively.
The 2019 FSR was released on 5 December 2019.

Tender results of Treasury bills and Government bonds were posted on the Bank’s website, Bloomberg and Reuters.

Featured as well on the website were commercial banks’ key disclosure statements.

The Reserve Bank issued 26 Press Releases and 6 Media Notes during the year.

Press Releases and Media Notes are aimed at ensuring that media stakeholders are provided with accurate and timely information which would then be reported to the public.
The Reserve Bank website remains the first point of contact for many stakeholders of the Bank and acts as a vital information hub where the public can find out how the Reserve Bank operates.

The Bank also maintains a Facebook account to provide updates in a timely manner to it's stakeholders.

The Reserve Bank’s website and Facebook page were regularly updated during the year to ensure timely and relevant information were disseminated.
The website is also being reviewed as the Bank seeks to ensure that it continues to be designed around the principle of making the most relevant information as accessible as possible for all its audience.

The website redesign will be completed in the next fiscal year.

Records Management The Reserve Bank’s Archives repository is located at the Bank’s Business Resumption Site (BRS) and aligns with the requirements of good governance and the Public Records Act (Rev.
2006) for proper recording and preservation of vital official records.

The Bank uses Total Records Information Management, an integrated Electronic Document Records Management System (EDRMS), for storing and retrieving indexed and digitised records.

The Bank’s EDRMS project continued during the year and will be ongoing during the rest of 2020.

Property Management and Security The Bank ensured that the main RBF Building, Domodomo House and the BRS were well maintained.
Repairs and maintenance programmes were completed to ensure the efficient operation of all systems.

This was possible through contractual agreements with reputable vendors for fixed durations.

The security management for the RBF building, BRS and Governor's residence were well maintained throughout the year without any major security breach.

Domestic Relations Over the 2019-20 FY, the Reserve Bank continued to engage and conduct economic presentations in strengthening its relationship with stakeholders.
The Reserve Bank continued its regular prudential consultations with supervised institutions in 2019-20 FY.
The Bank also met with industry stakeholders namely the Association Operating Expenses by Type Composition of the RBF’s Balance Sheet Staff Costs Total Administrative Costs n o i l l i M $ 25 20 15 10 5 0 Foreign exchange & Gold IMF Currency subscription Other assets Assets Reserve tranche position & SDR Domestic securities 3,000 2,000 1,000 Aug-July 2017 Aug-July 2018 Aug-July 2019 Aug-July 2020 0 Jan-July 2016 0 n o i l l i M $ -1,000 -2,000 Liabilities Jan-Jul 2016 Aug-Jul 2017 Aug-Jul 2018 Aug-Jul 2019 Aug-Jul 2020 -3,000 Source: Reserve Bank of Fiji SDR allocation Currency in circulation Source: Reserve Bank of Fiji Demand deposits Statutory reserve deposits Other liabilities 54 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 55 of Banks in Fiji, the Finance Companies Association on a quarterly basis and the Insurance Association of Fiji and the Foreign Exchange Dealers Association on a six-monthly basis.
Bilateral meetings were held with the heads of commercial banks, credit institutions, the FDB and the FNPF as the RBF enhanced its prudential surveillance due to COVID-19.

The Reserve Bank undertook various industry visits around the country and made several presentations on the economy while it convened thirteen industry meetings to discuss economic issues and provide economic briefs to the business community.
The Bank also provided economic and financial briefs to officials from Government ministries and other statutory bodies.

International Relations The Reserve Bank places special emphasis on its international relations and participation in relevant international forums and programmes.

Regular correspondences with multinational agencies were ongoing during the year on matters relating to the IMF, the World Bank, the ADB and other related agencies.
In September 2019, the Bank was represented at the 11th AFI Global Policy Forum in Kigali, Rwanda.

The Bank was also represented during the physical and virtual annual meetings of the IMF and the World Bank in October 2019 and April 2020, in Washington D.C.

Representations were also made in November 2019 at the 34th South Pacific Central Bank Governors’ meeting in Australia.

An IMF Article IV Visit took place from 3-13 December 2019.
In addition, a Stress Testing TA Mission was held on 4-15 November 2019 while the FSSR Mission was conducted from 4-15 November 2019.

The Bank also continues its collaboration with Griffith University and Bank of Papua New Guinea, CBSI and Reserve Bank of Vanuatu (RBV) in the form of publishing of working papers and contributing to regular blog updates in the areas of research and central banking.
The Governor and RBF staff also attended and participated in the South Pacific Central Banking Research Conference as well as the Regional Policy Dialogue held in Vanuatu on 13-14 November 2020.

Increased liaison was also noted during the year with partner agencies supporting Fiji in various projects including the ADB and IFC on disaster risk financing, the PFIP on the expansion of inclusive insurance in Fiji and the IMF’s PFTAC on the review of the Insurance Act, for which collaboration is ongoing.
The Bank continued to be represented in various technical forums in the region and abroad, at senior and technical levels and hosted visits by several foreign dignitaries and regional central banks.
Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 55 55 MISSION ENHANCE OPERATIONAL EFFICIENCY THROUGH INNOVATION AND RISK MANAGEMENT The Reserve Bank makes concerted efforts to reinforce and further develop a culture that places high emphasis on innovation that encourages and inspires staff to explore new ideas and different approaches to meet our mandate.
56 Reserve Bank of Fiji Annual Report 56 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 57 Information Technology (IT) Whilst innovation has always been engrained in the culture of the Bank, COVID-19 has in many ways heightened the need for the Bank to push all boundaries beyond the normal ways of doing business by building a workplace model that is nimble, resilient, responsive, clear in its communication and accountable in its partnerships.
IT systems and infrastructure has been at the forefront of innovation, playing an integral role in leading the digital transformation at the Bank.
To successfully deliver on the 2019-24 Strategic Plan, the IT implementation plan was developed to provide the much-needed framework and guidance on new technology initiatives, digitisation of processes and resilience against risk and cybersecurity threats, all geared towards delivering maximum efficiency whilst reducing operating costs, improving customer service, increasing the accessibility of data to staff and optimising the use of information for decision making.
The benefits of these achievements were quite evident especially during the COVID-19 lockdown whereby 60 percent of the Bank’s employees worked from home, continued to meet online and delivered essential services via remote access to the corporate network.

To further elaborate on the achievements, our IT infrastructure, including websites and networks, has remained secure, modern and resilient throughout the year.
The implementation of the Bank’s network monitoring and Security Information and Event Management (SIEM) solutions has boosted the security of resources with proactive identification of potential security issues.

Greater focus was also placed on strengthening the internal IT compliance culture.
In our efforts to continuously strengthen cybersecurity capabilities during the FY, the Bank commenced with the development of its cybersecurity framework as it remains a priority focus for the Bank, as a safe, secure and fully operational IT environment in ensuring we deliver our mandates.

This includes ongoing threat monitoring and vulnerability assessments.
Furthermore, ethical hackers and international penetration testers were engaged to conduct independent vulnerability assessments of external interfaces.

To further elaborate on works towards IT-related innovations, completion of the 2019 SWIFT attestation SWIFT Customer Security Programme (CSP) mandatory and advisory security controls, aimed at ensuring the security and integrity of the systems was a positive indication of the Bank’s commitment to promote an internationally reputable financial system.
Our continued simulation tests performed at the Bank’s BRS with a highly resilient network infrastructure enables us to continue providing critical functions through effective disaster preparedness and recovery.

The growing demand for information and communications technology services has led to continued automation of business processes.
Automation projects currently under user testing and nearing completion include, however, is not limited to the Economics Data Management and the Online Submission of Registry Regulatory Returns.

During the year, there were ongoing improvements to the Human Resource Information System to provide automated system reports with real-time people data.

The system is agile and through customisation, has the potential to offer various types of functionalities to suit the Bank’s changing business needs.
Further, the Bank continued to ensure that our employees are provided with the latest and relevant hardware and technologies.

Management of records is also a focus area for the Bank as good records management, i.e.

retention and usage of data, assists in decision making and mitigation of risks associated with it.

Over the year, the Bank has successfully digitised all its hard copy records into the Total Records Information Management (TRIM) system.
This allowed the Bank to ensure staff have complete access to accurate information in a timely and cost-effective manner.

The Bank further enhanced digital transformation by capturing all financial source documents into the Epicor Financial Management Software (EFMS).

This enabled faster and easier access to data resulting in quicker turnaround time for report generation and dissemination.
Furthermore, the teller receipt function was automated, with receipts being generated from EFMS resulting in added efficiencies in the teller operations via way of enhanced controls, tracking and reporting of cash inflows.

The Bank, over the years, has been very active in the coin numismatic market and during the year ventured into the budding banknote numismatic market.
Numismatic is a niche market involving the study and Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 57 collection of currency and includes both, banknotes and coins.

From our humble beginnings where a modest numismatic income target of $50,000 was barely achievable, the Bank’s numismatic operations have grown in strength over the years reaching thousands of collectors worldwide via its circulation/numismatic banknotes and coins sold.
At the end of this FY, the Bank has realised a notable approximate $1.4 million in numismatic income.

Notwithstanding this positive trend, the Bank continues to explore numismatic avenues in the market.

Our procurement function has evolved throughout the past decades from a clerical, order-taking role to a strategic role in order to enhance efficiencies and to streamline processes.

In this transition, the Bank moved away from a decentralised to centralised procurement process.
The Bank fully implemented its procurement manual, which led to a shift from traditional to modern procurement functions that operate cross-functionally with a much broader array of activities than in the past, ranging from selecting from reputable and experienced suppliers, forging better supplier relationships and developing the Bank’s supply strategy.
To seek assurance on the Bank’s building infrastructure, the Bank during the year completed the Building Condition Assessment project with a reputable local engineering consultant to ensure compliance and safety of the building systems and to also provide direction on the modification or replacement of services to enhance the building’s operational efficiency.

The Bank has commenced implementation of the recommendations arising from this report.
Risk Management The Bank is committed to ensuring that effective risk management and governance remain central to all its activities.

The Bank regularly assesses its control environment and has in place a risk management framework, which comprises a comprehensive list of policies and procedures and a Corporate Risk Register.

These enable the Bank to effectively manage current and emerging risks to macroeconomic and financial system stability.
The Bank’s primary risks are those directly related to its core mandates of price stability and financial stability.

The Bank identifies risks and implements controls in its operation and management of foreign reserves holdings.

Other financial risks that the Bank manages include liquidity risk, credit risk and market risk.

Risks related to work processes and inadequacies in human resources are important to the Bank in ensuring the efficient management of its operations.
Ongoing quality management initiatives and capacity building continued to be the focus of the Bank’s development programme.

The establishment of the HR Steering Committee with dedicated focus on driving effectiveness in HR strategies and policies is key to strengthening human capital development and workplace culture.

Regular review of policies, the framework and awareness training for staff help strengthen the risk culture and overall risk management in the Bank.
The Bank continued its review of the Risk Management Framework through 2019-20 FY to ensure its continued alignment with the latest standards in risk management practices and relevance to global and domestic developments.

This included reviews to the Bank’s policies on risk management, incident management, business continuity management, updating of the risk appetite statement and the risk registers.

Further to this, two new policies were introduced, namely, the Assurance and AML/CFT policies.
The Assurance policy specifically provides guidance to the Bank’s second line of defence in monitoring and reporting on the implementation of internal audit findings, in addition to carrying out assurance checks that would complement the Bank’s outsourced internal audit process.

Incident Reporting is also part of the Risk Management Framework of the Bank.
A reporting framework is in place to ensure incidents are identified, reported and that monitoring is ongoing to ensure that all incidents are resolved effectively, with lessons learnt recorded for future reference.

The Bank’s Business Continuity Plan (BCP) was updated during the review year, specifically on the workforce and workplace arrangements as a result of the COVID-19 situation.
The BCP framework included arrangements for functional teams to be separated into two groups to ensure that the entire human resource pool and the workplace were not compromised.

The plan also considered work from home arrangements for the duration of the lockdown to ensure continuity of business operations.
The Bank’s BRS is the backup site for critical operations should the Reserve Bank’s main building become inaccessible due to an emergency or a disaster or if the systems in 58 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 59 the building become inoperable.

Critical operations include foreign reserves management, finance management, settlements and some domestic market processes, including FIJICLEAR operations are regularly tested at the site.
The BRS also houses the Bank’s archives.

Best practice requires that BCP procedures are regularly tested to ensure its effective readiness for emergency situations.

The Bank’s crisis communication procedures are established and practised through call trees.

Emergency evacuation drills continue to ensure awareness of emergency procedures by staff and tenants of the RBF building.
During the year, the Bank updated its emergency procedures, conducted training for fire wardens and participated in several emergency drills to raise staff familiarity with the evacuation processes and will continue to conduct such training and drills to enhance disaster preparedness and planning.

Corruption in 2018.

The audit function as a third line of defence under the Bank’s risk management function continued to provide independent assessments to ensure the effective oversight of risks in the Bank.
The internal audit function is outsourced to KPMG (Fiji) while external audit is undertaken by PricewaterhouseCoopers (Fiji).

Areas for improvement identified by internal and external audits are addressed as appropriate and forms part of the internal assurance function.

The Board, the Board Audit and Risk Committee, the Board Governance Committee and the Risk and Business Continuity Management Committee also contribute to the review and strengthening of the Bank’s risk management function.
The Risk Management and Communications Group (RMCG) forms the second line of defence in the management of risks in the Bank and its Middle Office is responsible for managing risks relating to the Bank’s reserves management operations.

Compliance and performance reports are prepared by the Middle Office, discussed at the Investment Committee meetings monthly and reported to the Board.

The RMCG also ensures that the Bank’s interests are protected against legal risks.
These risks are mitigated by the provision of legal advice, litigation, drafting, statutory compliance, legislation and policy reviews and the enhancement of the Anti-Corruption Framework developed in consultation with Fiji Independent Commission Against Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 59 59 MISSION DEVELOP EMPOWER AND RETAIN A PROFESSIONAL TEAM Human resources (HR) represent the Bank’s greatest asset in the delivery of its corporate goals.
The primary objective of HR management is to attract, develop, retain and motivate staff to deliver the vision of Leading Fiji to Economic Success.

60 Reserve Bank of Fiji Annual Report 60 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 61 Staffing As at 31 July 2020, the Reserve Bank staff complement was 199.
During the review period, 19 staff left the Bank, of which, seven left for other employment opportunities, six retired, five migrated, and one employment contract was terminated.

At the end of the FY, the Bank recruited nine staff.

Management Remuneration Remuneration for the Governor is set and approved by the Constitutional Offices Commission.

For the Executive Management and Managers, review and approval of the remuneration package is vested with the Board Governance Committee.
The Executive Management and other management staff are employed on an individual contract basis and are remunerated in line with the market.18 The last market adjustments were made in August 2019.
Staff Development The Staff Development Policy and Staff Training Needs Analysis (TNA) supports a continuous learning culture in the Bank through on-the-job training, job rotations, full-time study leave with/without pay, part-time studies, correspondence and short courses at both local and overseas institutions.

Accordingly, the Bank organised induction, mentoring programmes and on-the-job training for Bank staff.
Management is required to prepare a TNA for each member of the staff which is updated annually.

The Bank continued to sponsor staff for further academic qualifications through full time, part-time, correspondence, short courses and seminars at local and overseas institutions.

In the 2019-20 FY, one staff was on study leave with pay, pursuing Masters Studies in NZ.

This was completed in December 2019 after which she returned to the Bank.
In addition, 16 staff pursued part- time studies at the University of the South Pacific (USP) and the Fiji National University (FNU) towards Bachelors, Postgraduate and Masters programmes.
In the 2019-20 FY, 88 staff undertook various short courses locally such as those organised by the USP, FNU, Pacific TAFE, FIA, Fiji Commerce and Employers Federations, Ministry of Labour, Fiji Institute of Bankers, Fiji Institute of Internal Auditors (IIA), Fiji Human Resources Institute (FHRI) and those organised internally.
Moreover, 61 staff attended various courses abroad that were organised by the IMF-STI, South East Asian Central Banks, AFI, Asia Pacific Group, ADB, RBA, RBV, Bank of England, Griffith University and the World Bank.

The Bank also sponsored staff professional memberships for the FIA, FIB, IIA, FHRI and Australian Human Resource Institute.

Employment Relations The Bank continues to maintain a cordial relationship with the Fiji Bank and Finance Sector Employees Union.
The Bank continues to engage with the Union on Log of Claims matters.

RBF Staff Statistics (as at 31 July 2020) Total Staff Average Years of Service Annual Staff Turnover (%) Source: Reserve Bank of Fiji 2015 214 9.9 6.5 Jan – Jul 2016 Aug – Jul 2017 Aug – Jul 2018 Aug – Jul 2019 Aug – Jul 2020 214 9.8 7.5 210 9.9 9.1 211 9.9 8.6 209 10.5 4.8 199 11 9.5 Management Remuneration as at 31 July 2020 Total Cash Remuneration Staff Numbers i.

$335,061 ii.

$290,707 iii.

$200,865 iv.


$63,517 - $102,890 (i) - (iii) Executive Management.

(iv) Other Management staff.

Source: Reserve Bank of Fiji 1 1 6 27 18 As determined by the annual PwC Banking and Finance Sector Market Survey.

Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 61 61 61 Under the Bank’s Rewards and Recognition System, performance bonuses were paid out to eligible staff in July 2020.
Labour Management Consultative Cooperation The Employment Relations Promulgation No.

36 of 2007 section 9(3) requires the Bank to establish a Labour Management Consultation and Cooperation (LMCC) Committee as a forum for meaningful consultation, cooperation and exchange of workplace information to promote good faith employment relations and improve productivity.

The Committee was registered with the Ministry of Labour under Regulation 7 in August 2009.
The Committee comprises seven management and seven staff representatives.

There were four meetings held in the 2019-20 FY.

Quality Management Teams The Bank has been actively encouraging staff to focus on quality management practices in their daily work processes.

Through these quality management teams, Groups are able to make continuous improvement in processes and performance.

Attachments The Bank has an agreement with the National Employment Centre (NEC) in compliance with the NEC Decree.
Under this agreement, the Bank is required to provide workplace attachments to at least 11 unemployed persons registered with the NEC.

The Bank actively seeks to comply with the NEC requirements.

On 11 March 2020, the World Health Organisation declared COVID-19, a disease caused by a new strain of coronavirus as a global pandemic.

To safeguard staff and ensure a safe working environment, the Bank implemented rapid safety measures whilst ensuring continuity of the Bank’s critical functions.
Internship The Bank introduced an Internship policy in November 2016.

The policy aims to provide students with an opportunity to engage with the Bank and obtain practical work experience.

The Bank engages five interns at any one time to enable the efficient and effective management of the programme.

The Bank also participated in the Careers Fair at the USP and this generated interest amongst students.
Consequently, the Bank engaged five interns who were second year USP students for a period of three months.

Occupational Health and Safety The Bank is committed to providing and maintaining a safe and healthy working environment for its employees and visitors.

There was a fire drill organised in July 2020 whereby staff took part in the evacuation exercise.

In the 2019-20 FY, the Bank’s Occupational Health and Safety (OHS) Committee met three times.
The Bank continued to provide OHS related training and monitor OHS issues regularly to ensure that we maintain a safe and healthy work environment.

Long Service Recognition The Governor’s Service Recognition and Long Service Loyalty Award recognises dedicated, long and meritorious service to the Bank.

In the 2019-20 FY, four staff achieved 15 years of service, three staff achieved 20 years of service and two staff achieved 25 years of service while two staff achieved 30 years of service.
During the year, the Governors and Chief Managers also rewarded staff for their performance.
25 years of RBF Service 30 years of RBF Service Ms Vilimaina Ketenilagi Ms Lavenia Cocker Mr Dennis Murray Ms Caroline Waqabaca 62 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 63 SELECTED UPDATES AUGUST 2019-JULY 2020 August September October October 22 Launch of the RBF 2019-24 Strategic Plan 11-13 4th AFI AGM, Kigali, Rwanda 8 Governor launched the ANZ Bank’s Financial Literacy Impact Survey 2019 18-20 World Bank Group and IMF Annual Meetings, Washington D.C. October November November November 21-23 Deputy Governor attended the Cyber Security and the Resilience of the Financial Sector Conference, Bank of England, London 12-14 15th AFI Budget and Finance Committee 13-14 Governor attended the South Pacific Central Banking Research Conference and Regional Policy Dialogue, Vanuatu 19-20 34th South Pacific Central Bank Governors’ Meeting, Sydney, Australia November November December December 21 Fiji Institute of Bankers 26th AGM 16 Investment Fiji’s Prime Minister’s International Business Awards 3-13 IMF Article IV Consultation Mission 6-7 Governor attended the 21st Attorney General’s Conference December December January February 11 RBF Seminar Series – Global Developments and Prospects: Implications for Fiji 31 RBF launched the Fintech Regulatory Sandbox 30 Opening of the International Social Security Association Focal Point for PICs at the FNPF 17 Honorable Minister for Economy tabled the Reserve Bank of Fiji Annual Report 2018-19 in Parliament.
February March March March 19 Deputy Governor opened the RegNet Seminar and roundtable discussions with the RBF and stakeholders on climate finance 4 Deputy Governor – Joint Guest at the opening of the Westpac Garden City Branch and officially launched BSP Life’s New ‘Bula Secure’ and ‘Bula Secure Plus’ single premium products 9 Bank of Papua New Guinea Delegation Visit 16-20 Central Bank of Solomon Islands Delegation Visit June 9 Deputy Governor received print resources from the US Ambassador Joseph Cella June 22-24 RBF Industry Visit June July 29 13th PIRI Experts Group for Financial Inclusion (virtual meeting) 2 Press Statement on the revised growth projections for the Fijian economy Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 63 THE YEAR AHEAD The Reserve Bank will continue to focus on fulfilling its core responsibilities in the 2020-21 FY.
Listed below are priority areas where special efforts will focus.

Strategic Direction and Alliances The Bank will continue the implementation Foreign Reserves Management Looking ahead, foreign reserves management will continue to be of its 2019-24 Strategic Plan for the challenging in the low yield environment second year.

The Bank’s executives and and due to the uncertainties relating to the industry consultation in the next reporting year.
The Reserve Bank will also work on completing Phase 2 of its reform programme on conduct risk and culture.

management will monitor this and ensure ongoing COVID-19 crisis.

With interest As a member of the South Pacific Central that the key deliverables in the Strategic rates expected to remain low for some Banks Forum, the Reserve Bank will Plan are achieved.

time, income from foreign investments is continue to be part of the Regional KYC anticipated to fall.

However, the RBF will Utility project.


The Bank will continue to strengthen its alliance with strategic partners and institutions/organisations abroad and locally.

Legislation The Reserve Bank will continue to progress the legislative work it is currently undertaking in 2020-21 FY on the following financial sector reforms: continue to prioritise safety and liquidity over income, in its management of foreign reserves.
Financial System Regulation and Supervision The Reserve Bank will continue to develop and implement initiatives to enhance its risk-based supervision processes and ensure the ongoing effectiveness of its • Review of the Insurance Act 1998, prudential policy development work.
The through the technical assistance of the IMF PFTAC; • Amendment to the Fair Reporting of Credit Act 2016 in line with the ongoing work regarding Fiji’s Ease of Doing Business ranking; and Bank will also continue to implement the recommendations of the Fiji FSSR conducted in 2018 and subsequent technical assistance missions provided by the IMF under the programme.

• Finalisation of the proposed Credit Prioritising the regulatory lens on the Union legislation.
impact of COVID-19 on the financial sector Monetary Policy The Reserve Bank of Fiji will continue to ensure that appropriate and effective monetary policy is implemented to protect its dual mandate of maintaining low inflation and achieving a sufficient level of foreign reserves.

To strengthen and enhance macroeconomic stability, the Reserve Bank will continue to facilitate investment, enhance inclusive economic growth and development.
and the preservation of financial system stability is of paramount importance.

The Reserve Bank will continue to closely monitor and liaise with supervised entities on the relief measures extended to customers and how the impact of these are to be managed and reported.

The Banking Supervision Policy Statement Nos.


9A and 9B on Liquidity Risk Management Requirements for both commercial banks and credit institutions and the new draft policy on Minimum Requirements for Cybersecurity of Supervised Entities are planned for Corporate Services Enhance- ments The Reserve Bank will continue to strengthen its work processes to reduce its carbon footprint.
To further increase the Bank’s process efficiency and allow for better information and decision support system, work will continue on the enhanced automation and process reengineering of several of its key processes.

Furthermore, the Bank will commence work on a new cybersecurity framework which will include the drafting and alignment of IT practices and processes to enhance its cybersecurity posture.

The Records Management System will be upgraded to provide for enhanced management and storage of records.
Work will continue on projects for the modification and enhancement of service systems in the building towards improved operational efficiency.
National Payments System Project (NPSP) The Reserve Bank of Fiji (RBF) and the Fiji Government, with the assistance 64 Reserve Bank of Fiji Annual Report 64 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 65 and collaboration of the IFC and strategy for the national payment system, and comprehensive framework and Commonwealth Secretariat, have upgrading the current payments system development plan for the MSME sector in embarked on a programme to reform infrastructure and building a central Fiji.
Efforts to improve MSME access to our national payments system.

The securities depository system.

The finance and other alternative capital raising broad objectives of the NPSP are to development of the central depository technologies are part of the development modernise the country’s payment system system is a vital milestone in our capital agenda for the coming year.
infrastructure to effectively and efficiently markets development plan and also forms meet the growing needs and aspirations part of our commitment when listing our of our economy.

Amongst other things, Green bonds under the London Stock these include facilitating digital solutions, Exchange.

enhancing inclusiveness, promoting safety and soundness, mitigating potential risks and protecting users.
Commemorative currency During the next financial year, the Reserve Bank will launch the new $50 banknote and 50 cent coin commemorating the This is a large and complex project that will 50th anniversary of Fiji’s independence.

provide immense benefit for the nation.

These will co-circulate with the current $50 banknote and 50 cent coin.
The programme’s work is expected to span at least 24 months and includes developing a legal framework and MSME Sector Development The Bank will work with MSME Fiji at the MCTTT to develop an enabling Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 65 65 Financial Statements For the year ended 31 July 2020 Contents Directors’ report Statement by Directors Independent auditor’s report Statement of comprehensive income Statement of changes in equity Statement of financial position Statement of cash flows Notes to and forming part of the financial statements 67-69 70 71-73 74 75-76 77 78 79-108 66 Reserve Bank of Fiji Annual Report 66 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 67 Reserve Bank of Fiji Directors’ report The Directors present their report together with the financial statements of the Reserve Bank of Fiji (“the Bank”) for the year ended 31 July 2020 and the auditor’s report thereon.
Directors The Directors in office during the financial year and at the date of this report were: Ariff Ali (Chairman and Governor) Makereta Konrote (Ex-officio member) Pradeep Patel Tevita Kuruvakadua Tony Whitton State of affairs In the opinion of the Directors: • • there were no significant changes in the state of affairs of the Bank during the financial year under review not otherwise disclosed in this report or the financial statements; the accompanying statement of financial position gives a true and fair view of the state of affairs of the Bank as at 31 July 2020 and the accompanying statement of comprehensive income, statement of changes in equity and statement of cash flows give a true and fair view of the results, changes in equity and cash flows of the Bank for the year then ended.
Principal activities The Reserve Bank’s role as a central bank, as defined in the Reserve Bank of Fiji Act, 1983, is: (a) to regulate the issue of currency and the supply, availability and international exchange of money; (b) to promote monetary stability; (c) to promote a sound financial structure; (d) to foster credit and exchange conditions conducive to the orderly and balanced economic development of the country; (e) to regulate the insurance industry; and (f) to regulate the capital markets and the securities industry.
Operating results The net profit of the Bank for the year ended 31 July 2020 was $30.1m (2019: $28.9m).

Reserves In accordance with Section 8(1) of the Reserve Bank of Fiji Act, 1983, the Minister and the Board of Directors have agreed to transfer $1.0m (2019: $1.0m) to the General Reserves as at the end of the financial year.
External reserves Under the provisions of Section 31 of the Reserve Bank of Fiji Act, 1983, the value of the External reserves provided for in Section 30 shall not be less than 50% of the total Demand liabilities of the Bank.

At 31 July 2020, the value of the External reserves was 78% (2019: 88%) of total Demand liabilities.
Payable to the Fiji Government In accordance with the Reserve Bank of Fiji Act, 1983, the following amounts totalling $31.8m for the year ended 31 July 2020 (2019: $29.4m) are payable to the Fiji Government: Section 8(3): Net profit after transfer to General reserves - $29.1m for the year ended 31 July 2020 (2019: $27.9m).

Section 34(3): One-fifth balance of Revaluation reserve account - foreign currency - $2.7m (2019: $1.5m).
Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 67 Reserve Bank of Fiji Directors’ report - continued Bad and doubtful debt The Directors took reasonable steps before the financial statements of the Bank were made out to ascertain that all known bad debts were written off and adequate allowance was made for doubtful debts.
At the date of this report, the Directors are not aware of any circumstances which would render the amount written off for bad debts, or the amount of the provisions for doubtful debts, inadequate to any substantial extent.

Provisions There were no material movements in provisions during the financial year from the normal amounts set aside for depreciation and employee entitlements.
In relation to allowance for impairment losses, an additional allowance of $0.58m was raised during the financial year in accordance with the requirements of IFRS 9 and to cater for potential longer term impacts of COVID-19.

Significant events during the year The rapid spread of COVID-19 served a severe blow to the global economy that was on the cusp of a modest revival after a synchronised slowdown last year.
Global growth prospects have weakened markedly as domestic demand collapsed amidst the standstill in international travel and plunge in global trade.

Governments responded by introducing stimulus packages to contain the virus and support the economy.

On their part, central banks reduced interest rates and injected liquidity to boost credit creation and support economic activity.

The Fiji economy is not immune to the impact of the Coronavirus.
Already slowing from the second half of 2019, the onset of the pandemic earlier this year escalated the downturn in economic activity.

Given the considerable uncertainties, the extent of the overall damage will depend on how soon and effectively the outbreak is contained domestically, the resumption of international travel and ensuing pick-up in tourism-related activities over the coming months.
The Bank has carefully considered the impact of COVID-19 in preparing its financial statement for the year ended 31 July 2020.

Assets The Directors took reasonable steps before the Bank’s financial statements were made out to ascertain that the assets of the Bank were shown in the accounting records at a value equal to or below the value that would be expected to be realised in the ordinary course of business.
At the date of this report, the Directors were not aware of any circumstances which would render the values attributable to the assets in the financial statements misleading.
Directors’ benefit Other than directors remuneration and benefits disclosed in the financial statement, no Director of the Bank has, since the end of the previous financial period, received or become entitled to receive any other benefit by reason of contract made by the Bank with the Director or with a firm of which the Director is a member, or with a company in which the Director has substantial financial interest.
Events subsequent to balance date The Bank did not identify any subsequent events precipitated by COVID-19 related developments, which would require adjustment to the amounts or disclosures in the financial statements.

Given the fluid nature of the current situation, the Bank will continue to regularly review forward looking assumptions and forecast economic scenarios.
Apart from the above, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Bank, to affect significantly the operations of the Bank, the results of those operations, or the state of affairs of the Bank, in future financial periods.
68 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 69 Reserve Bank of Fiji Directors’ report - continued Other circumstances At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or financial statements which render amounts stated in the financial statements misleading.

Dated at Suva this 24th of September 2020.
Signed in accordance with a resolution of the Board of Directors: Ariff Ali Chairman of the Board and Governor Pradeep Patel Director Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 69 Reserve Bank of Fiji Statement by Directors In the opinion of the Directors: (a) (b) (c) (d) (e) the accompanying statement of comprehensive income is drawn up so as to give a true and fair view of the results of the Bank for the year ended 31 July 2020; the accompanying statement of changes in equity is drawn up so as to give a true and fair view of the changes in equity of the Bank for the year ended 31 July 2020; the accompanying statement of financial position is drawn up so as to give a true and fair view of the state of affairs of the Bank as at 31 July 2020; the accompanying statement of cash flows is drawn up so as to give a true and fair view of the cash flows of the Bank for the year ended 31 July 2020; at the date of this statement, there are reasonable grounds to believe the Bank will be able to pay its debts as and when they fall due; (f) all related party transactions have been adequately recorded in the books of the Bank; and (g) the financial statements have been properly prepared in accordance with International Financial Reporting Standards (“IFRS”) except as noted in Note 2(a) to the financial statements.
In accordance with the provisions of Section 34 of the Reserve Bank of Fiji Act, 1983, exchange gains and losses are credited or charged directly to the Revaluation reserve account - foreign currency and are not included in the computation of annual profits or losses of the Bank.

This is at variance with International Accounting Standard 21 (“IAS 21”) “Effects of Changes in Foreign Exchange Rates” which requires that currency translation gains and losses be credited or charged to profit or loss.
In the opinion of the Directors, the accounting treatment adopted is appropriate in view of the requirement of Section 34 of the Reserve Bank of Fiji Act, 1983.

Had the Bank adopted IAS 21 there would have been a net profit of $37.6m, an increase of $7.5m being the currency translation gain for the year ended 31 July 2020.

For and on behalf of the Board of Directors by authority of a resolution of the Directors this 24th of September 2020.
Ariff Ali Chairman of the Board and Governor Pradeep Patel Director 70 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 71 Independent Auditor’s Report To the Board of Directors of Reserve Bank of Fiji Report on the audit of the financial statements Opinion We have audited the accompanying financial statements of the Reserve Bank of Fiji (the ‘Bank’), which comprise the statement of financial position of the Bank as at 31 July 2020, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements are prepared, in all material respects, in accordance with the accounting policies described in Note 2 of the financial statements and in the manner required by the Reserve Bank of Fiji Act, 1983.

Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs).
Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Emphasis of Matter We draw attention to Note 2(a) to the financial statements which refers to the reporting framework and the policy on the treatment of exchange gains and losses and its variance with IAS 21 “Effect of changes in Foreign Exchange Rates”.

Our opinion is not qualified in respect of this matter.
Independence We are independent of the Bank in accordance with the ethical requirements of the International Ethics Standards Board for Accountant’s Code of Ethics for Professional Accountants (IESBA Code) that are relevant to our audit of the financial statements in Fiji, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code.

Other Information Directors and management are responsible for the other information.
The other information comprises the information included in the Bank’s Annual Report for the year ended 31 July 2020 (but does not include the financial statements and our auditor’s report thereon).

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

PricewaterhouseCoopers, Level 8 Civic Tower, 272 Victoria Parade, Suva, Fiji.

GPO Box 200, Suva, Fiji.


T: (679)3313955 / 3315199, F: (679) 3300981 / 3300947 PricewaterhouseCoopers is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 71 If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard, except that not all other information was available to us at the date of our signing.
Responsibilities of Directors and Management for the Financial Statements Directors and management are responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards and with the requirements of the Reserve Bank of Fiji Act, 1983, and for such internal control as the directors and management determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors and management are responsible for assessing the Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors and management either intend to liquidate the Bank or to cease operations, or have no realistic alternative but to do so.

The directors and management are responsible for overseeing the Bank’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the ISAs will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with the ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit.
We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors and management.

• Conclude on the appropriateness of the directors and management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Bank’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion.

72 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 73 Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.

However, future events or conditions may cause the Bank to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represents the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the directors and management regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
Restriction on Use This report is made solely to the Board of Directors of the Bank, as a body.

Our audit work has been undertaken so that we might state to the Board of Directors those matters we are required to state to them in an auditor’s report and for no other purpose.

To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Bank and the Bank’s Board of Directors as a body, for our audit work, for this report, or for the opinions we have formed.
PricewaterhouseCoopers Chartered Accountants Wiliki Takiveikata 24 September 2020 Suva, Fiji Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 73 Reserve Bank of Fiji Statement of comprehensive income For the year ended 31 July 2020 Income Interest income Other revenue Total income Expenses Interest expense Administration expenses Amortisation of securities Other expenses Allowance for impairment losses Total expenses Net profit for the period Other comprehensive income/ (losses) Amortisation of fair value reserve Change in fair value of financial assets Asset revaluation reserve movement Currency translation gains/ (losses) Total other comprehensive income Total comprehensive income for the period Note 4(a) 4(b) 4(c) 4(d) 6 4(e) 4(f) 13 18 31 July 2020 $000 54,769 5,070 31 July 2019 $000 56,764 4,435 59,839 61,199 1,060 20,401 947 6,730 578 2,150 22,286 1,154 6,118 597 29,716 32,305 30,123 28,894 (921) 4,547 629 7,485 (1,133) 10,380 5,107 (403) 11,740 13,951 41,863 42,845 The statement of comprehensive income is to be read in conjunction with the notes to and forming part of the financial statements set out on pages 79 to 108.
74 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 75 Reserve Bank of Fiji Statement of changes in equity For the year ended 31 July 2020 Fair Value reserve Asset revaluation reserve Retained earnings Total Paid-up capital General reserves $000 2,000 $000 41,050 Revaluation reserve account -foreign currency $000 7,856 $000 7,228 $000 19,715 $000 - 28,894 (1,000) - - - - - $000 77,849 28,894 - (1,133) 10,380 5,107 (403) 13,951 - 1,000 - - - - - - - - - - (403) - - (1,133) 10,380 - - - - - - 5,107 - (403) 9,247 5,107 - - - - - - - - 1,000 (403) 9,247 5,107 27,894 42,845 2,000 42,050 7,453 16,475 24,822 27,894 120,694 - - (1,491) - - (27,894) (29,385) Balance at 1 August 2018 Total comprehensive income for the year Net profit Transfer to General reserves (Note 18) Other comprehensive income/ (losses) Amortisation of fair value reserve Change in fair value of financial assets Asset revaluation reserve movement (Note 18) Net losses arising from currency translation differences Total other comprehensive (losses)/ income Total comprehensive income/ (losses) for the year Transactions with owners, recorded directly in equity Payable to the Fiji Government (Note 13) Balance at 31 July 2019 2,000 42,050 5,962 16,475 24,822 - 91,309 The statement of changes in equity is to be read in conjunction with the notes to and forming part of the financial statements set out on pages 79 to 108.
Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 75 Reserve Bank of Fiji Statement of changes in equity - continued For the year ended 31 July 2020 Paid-up capital General reserves Revaluation reserve account -foreign currency Fair Value reserve Asset revaluation reserve Retained earnings Total $000 2,000 $000 42,050 $000 5,962 $000 16,475 $000 24,822 - - - - - - - - - 1,000 - - - - - - - - - - 7,485 - - (921) 4,547 - - 7,485 3,626 1,000 7,485 3,626 - - - - 629 - 629 629 $000 - 30,123 (1,000) - - - - - $000 91,309 30,123 - (921) 4,547 629 7,485 11,740 29,123 41,863 2,000 43,050 13,447 20,101 25,451 29,123 133,172 - 2,000 - 43,050 (2,689) 10,758 - - (29,123) 20,101 25,451 - (31,812) 101,360 Balance at 1 August 2019 Total comprehensive income for the year Net profit Transfer to General reserves (Note 18) Other comprehensive income/ (losses) Amortisation of fair value reserve Change in fair value of financial assets Asset revaluation reserve movement (Note 18) Net gains arising from currency translation differences Total other comprehensive income Total comprehensive income for the year Transactions with owners, recorded directly in equity Payable to the Fiji Government (Note 13) Balance at 31 July 2020 The statement of changes in equity is to be read in conjunction with the notes to and forming part of the financial statements set out on pages 79 to 108.
76 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 77 Reserve Bank of Fiji Statement of financial position As at 31 July 2020 Foreign currency assets Short-term commercial paper and current accounts Marketable securities Gold Accrued interest International Monetary Fund - Reserve tranche position - Special drawing rights - PRGF - HIPC Trust - Currency subscription Total foreign currency assets Local currency assets Cash on hand Domestic securities Financing facilities Currency inventory Other assets Intangible assets Property, plant and equipment Total local currency assets Total assets Foreign currency liabilities Demand deposits IMF - PRGF - HIPC Trust IMF - Special drawing rights allocation Total foreign currency liabilities Local currency liabilities Demand deposits Payable to the Fiji Government Currency in circulation Statutory reserve deposits IMF - Notes currency subscription Other liabilities Total local currency liabilities Total liabilities Net assets Capital and reserves Paid-up capital General reserves Revaluation reserve account - foreign currency Available-for-sale reserve Asset revaluation reserve Note 5 5 5 5/19 5/19 19 19 16 31 July 2020 $ July 2019 $ Reserve Bank of Fiji Annual Report Signed in accordance with the resolution of the Board of Directors: Ariff Ali Chairman of the Board and Governor Pradeep Patel Director The statement of financial position is to be read in conjunction
 with the notes to and forming part of the financial statements set out on pages 79 to 108.
Reserve Bank of Fiji Annual Report 77 Reserve Bank of Fiji Statement of cash flows For the year ended 31 July 2020 Operating activities Rental lease income Numismatic sales Interest received Other income Interest paid New currency payments Administration and other expenses Net movement of short-term commercial paper Net movement in fixed term deposits Net movement in International Monetary Fund accounts Net movement of domestic securities Net movement in financing facilities Net movement in other assets Note 31 July 2020 $000 476 1,373 51,202 2,278 (1,060) (646) (18,977) 70,152 24,709 756 (201,586) (126,088) 207 31 July 2019 $000 476 789 55,352 1,951 (2,150) (277) (22,170) (139,533) 54,584 731 (86,308) (35,718) (348) Cash flows used in operating activities (197,204) (172,621) Investing activities Payment for property, plant and equipment and intangibles Net movement of bonds Cash flows from (used in) investing activities Financing activities Net movement in demand deposits Payment to the Fiji Government Net movement in currency in circulation Net movement in statutory reserve deposits Cash flows from financing activities Net effect of currency translation Net (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the period (861) (164,491) (812) 108,840 (165,352) 108,028 265,270 (29,385) 18,435 42,792 297,112 7,485 11,314 (32,465) 14,842 6,810 501 (403) (57,959) (64,495) 242,218 306,713 Cash and cash equivalents at the end of the period 16 184,259 242,218 The statement of cash flows is to be read in conjunction with the notes to and forming part of the financial statements set out on pages 79 to 108.
78 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 79 Reserve Bank of Fiji Notes to and forming part of the financial statements For the year ended 31 July 2020 1.
Principal activities and principal place of operations The Reserve Bank’s role as a central bank, as defined in the Reserve Bank of Fiji Act, 1983, is: (a) to regulate the issue of currency and the supply, availability and international exchange of money; (b) to promote monetary stability; (c) to promote a sound financial structure; (d) to foster credit and exchange conditions conducive to the orderly and balanced economic development of the country; (e) to regulate the insurance industry; and (f) to regulate the capital markets and the securities industry.
The Bank’s principal place of operations is located at 1 Pratt Street, Suva, Fiji.

2.

Statement of significant accounting policies and statutory requirements (a) Statement of compliance The financial statements have been prepared in accordance with the provisions of the Reserve Bank of Fiji Act, 1983 and International Financial Reporting Standards (IFRS) except as detailed below.
The provisions of Section 34 of the Reserve Bank of Fiji Act, 1983 requires exchange gains and losses to be credited or debited directly to the Revaluation reserve account - foreign currency and not be included in the computation of annual profits or losses of the Bank.

This is at variance with IAS 21 “Effects of Changes in Foreign Exchange Rates” which requires that currency translation gains and losses be credited or debited to profit or loss.
In accordance with Section 34, losses arising from exchange fluctuations are set off against any credit balance in the Revaluation reserve account - foreign currency; if such balance is insufficient to cover such losses, the Fiji Government is required to transfer to the ownership of the Bank non-negotiable non-interest bearing securities to the extent of the deficiency.
Any credit balance in the Revaluation reserve account - foreign currency at the end of each financial period is applied first, on behalf of the Fiji Government, to the redemption of any non- negotiable non-interest bearing notes previously transferred to the Bank by the Fiji Government to cover losses and thereafter one-fifth of any remaining balance is paid to the Fiji Government.
In the opinion of the Directors, the accounting treatment adopted is appropriate in view of the requirement of Section 34 of the Reserve Bank of Fiji Act, 1983.

Had the Bank adopted IAS 21 there would have been a net profit of $37.6m for the year ended 31 July 2020 (2019: $28.5m), an increase of $7.5m (2019: a decrease of $0.4m), being the net gain arising from currency translation differences.
Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 79 Reserve Bank of Fiji Notes to and forming part of the financial statements For the year ended 31 July 2020 2.

Statement of significant accounting policies and statutory requirements - continued (b) Basis of preparation The preparation of the financial statements requires the use of certain critical accounting estimates.

It also requires Management to exercise its judgement in the process of applying the Bank’s accounting policies.
The areas involving a higher degree of judgement or complexity, or areas where assumptions are significant to the financial statements are disclosed in Note 3.

Reserve Bank of Fiji (“the Bank”) operates under the Reserve Bank of Fiji Act, 1983.
The financial statements are prepared on the historical cost basis except for the following: financial assets are measured at fair value through other comprehensive income (FVOCI); financial assets are measured at amortised cost; and • • • property is measured at fair value.

When estimating fair value, the Bank has considered the actual and potential impacts on the value of its investments from the COVID-19 pandemic.
Where, in the judgement of the Bank, an investment has been temporarily impacted by the pandemic, the assessed value of the impact is deducted when deriving the fair value.

The accounting policies as set out below have been applied consistently and, except where there is a change in accounting policy, are consistent with those of the previous periods.
Changes in accounting policies IFRS 16 ‘Leases’ IFRS 16 ‘Leases’ replaces IAS 17 ‘Leases’ along with three Interpretations (IFRIC 4 ‘Determining whether an Arrangement contains a Lease’, SIC 15 ‘Operating Leases-Incentives’ and SIC 27 ‘Evaluating the Substance of Transactions Involving the Legal Form of a Lease’).
The adoption of this new Standard will result in the Bank recognising a right-of-use asset and related lease liability in connection with all former operating leases except for those identified as low-value or having a remaining lease term of less than 12 months from the date of initial application.

The Bank does not have any such lease arrangement at this point in time.
The new Standard requires the use of the modified retrospective approach, with the cumulative effect of adopting IFRS 16 being recognised in equity as an adjustment to the opening balance of retained earnings for the current period.

Prior periods need not to be restated.

Given that the Bank does not have any such arrangements, adjustments were not applicable in the current financial year.
80 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 81 Reserve Bank of Fiji Notes to and forming part of the financial statements For the year ended 31 July 2020 2.

Statement of significant accounting policies and statutory requirements - continued (c) Foreign currency transaction Foreign currency balances have been translated to Fijian currency at rates of exchange ruling at period end.
Transactions in foreign currencies are recorded in Fijian currency at the exchange rate applicable at the time of the transaction.

As set out in Note 2(a) the gains or losses arising from foreign currency transactions are taken through other comprehensive income to the Revaluation reserve account - foreign currency.

(d) Functional currency The financial statements are presented in Fijian dollars, which is the Bank’s functional currency.
(e) Financial instruments The Bank measures and classifies its financial instruments into three categories: amortised cost, fair value through other comprehensive income and fair value through profit or loss.

Valuation of financial instruments All financial instruments are initially recognised at fair value.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the market at measurement date.
The fair value of a financial instrument on initial recognition is the transaction price or the fair value of the consideration given or received.

The fair value of financial instruments is measured on an individual basis.

(i) Financial instruments measured at amortised cost Financial assets that are held to collect the contractual cash flows and which terms that give rise on specified dates to cash flows that are solely payments of principal and interest are measured at amortised cost.
Such financial assets include fixed deposits, other assets, financing facilities, discounted securities, domestic bonds, other assets and staff housing loans.

In addition, most of the Bank’s financial liabilities are measured at amortised cost.

The carrying value of these financial assets at initial recognition includes any directly attributable transaction costs.
If the fair value is less than the cash amount advanced, the difference is deferred and recognised over the life of the loan through the recognition of interest income.

The Bank may commit to underwriting loans on fixed contractual terms for a specified period of time.

When the loan arising from the lending commitment is expected to be held for trading, the commitment to lend is recorded as a derivative.
When the Bank intends to hold the loan, the loan commitment is included in the impairment calculations set out below.

Non-trading reverse repurchase, repurchase and similar agreements When debt securities are sold subject to a commitment to repurchase them at a predetermined price (‘repos’), they remain on the balance sheet, as a liability is recorded in respect of the consideration received.
Securities purchased under commitments to resell (‘reverse repos’) are not recognised on the balance sheet and an asset is recorded in respect of the initial consideration paid.

Non-trading repos and reverse repos are measured at amortised cost.

The difference between the sale and repurchase price or between the purchase price and the resale price is treated as interest and recognised as net interest income over the life of the agreement.
Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 81 Reserve Bank of Fiji Notes to and forming part of the financial statements For the year ended 31 July 2020 2.
Statement of significant accounting policies and statutory requirements - continued (e) Financial instruments - continued Contracts that are economically equivalent to reverse repo or repo agreements (such as sales or purchases of debt securities entered in together with total return swaps with the same counterparty) are accounted for similarly to, and presented together with, reverse repo or repo agreements.
(ii) Financial assets measured at fair value through other comprehensive income Financial assets held for a business model that is achieved by both collecting contractual cash flows and selling, which contain contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest are measured at fair value through other comprehensive income (‘FVOCI’).

These comprise primarily marketable securities, cash and cash equivalents, gold and the IMF holdings.
They are recognised at the trade date when the Bank enters into contractual arrangements to purchase and are derecognised when they are sold or redeemed.

They are subsequently remeasured at fair value and changes therein (except for those relating to impairment, interest income and foreign currency exchange gains or losses) are recognised in other comprehensive income until the assets are sold.
Upon disposal, the cumulative gains and losses in the comprehensive income are recognised in the income statement as ‘Gains and losses from financial instruments’.

Financial assets measured at FVOCI are included in the impairment calculations set out below and impairment is recognised in profit or loss.
(iii) Financial instruments designated at fair value through profit or loss Financial instruments, other than those held for trading, are classified in this category if they meet one or more of the criteria set out below and are so designated irrevocably at inception: the use of the designation removes or significantly reduces an accounting mismatch; • • a group of financial assets or liabilities or a group of financial liabilities is managed and its performance is evaluated on a fair value basis, in accordance with a risk management or investment strategy; and the financial liability contains one or more non-closely related embedded derivative.
• Designated financial assets are recognised when the Bank enters into contracts with counterparties, which is generally on trade date, and are normally derecognised when the rights to the cash flows expire or are transferred.

Designated financial liabilities are recognised when the Bank enters into contracts with counterparties, which is generally at settlement date, and are normally derecognised when extinguished.
Subsequent changes in fair values are recognised in the income statement in ‘Net income from financial instruments held for trading on a fair value basis’ or ‘Net income/(expense) from assets and liabilities measured at fair value through profit or loss’.

Impairment of amortised cost and FVOCI financial assets Expected credit losses (‘ECL’) are recognised for staff housing loans, non-trading reverse repurchase agreements, other financial assets held at amortised cost and financial assets measured at FVOCI.
At initial recognition, allowance (or provision in the case of loan commitments) is required for ECL resulting from default events that are possible over the lifetime of the instrument, or less, where the remaining life is less than 12 months.

In the event of a significant increase in credit risk, allowance (or provision) is required for ECL resulting from all possible default events over the expected life of the financial instrument.
82 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 83 Reserve Bank of Fiji Notes to and forming part of the financial statements For the year ended 31 July 2020 2.
Statement of significant accounting policies and statutory requirements - continued (e) Financial instruments - continued Measurement of ECL The assessment of credit risk and the estimation of ECL are unbiased and probability-weighted, and incorporate all available information that is relevant to the assessment including information about past events, current conditions and reasonable and supportable forecasts of the future events and economic conditions at the reporting date.
In addition, the estimation of ECL should take into account time value of money.

In general, the Bank calculates ECL using three main components: a probability of default (‘PD’), a loss given default (‘LGD’) and the exposure at default (‘EAD’).

The ECL is calculated by multiplying the PD, LGD and the EAD.

The PD represents the probability of default occurring over the lifetime of the instrument.
The EAD represents the expected balance at default, taking into account repayment of principal and interest from the balance sheet date to the default event together with any expected drawdown of committed facilities.

The LGD represents expected losses on the EAD given the event of default, taking into account, among other attributes, the mitigating effect of collateral value at the time it is expected to be realised and the time value of money.
The table below sets out how the value of the key drivers of the Bank’s ECL model have been determined to meet the differing IFRS 9 requirements.

Model PD EAD LGD RBF IFRS 9 Requirement • Weighted average global corporate bond annual default rates (35 year period) leveraged on the Bank’s foreign investment portfolio.

• Point in time (based on current conditions, future into account adjusted to take estimates that will impact PD).

• Sovereign ratings the financial assets in the Bank’s domestic portfolio.
leveraged on • Gold and IMF financial assets categorised as extremely low risk foreign holdings.

• Staff loans and advance categorised as the riskiest all the Bank’s domestic holdings.

• Standard & Poor’s rate tables are used.

• As the latest S&P report issued is for 31 December 2019, the Bank has applied the 2020 global & local economic outlook forecast to adjust the PD’s and to account for the COVID-19 impact.

• Not lower than the current balance.

• Amortisation instruments.


captured for financial • Basel III guidance assessments yielded rates of 10% - 30% for the financial assets in the Bank’s foreign investment portfolio and 10% - 40% for the financial assets in the domestic commercial portfolios.

• Expected LGD (based on the estimate loss given default including the expected impact of future economic conditions such as changes in value of collateral).
• Discounted using the effective interest • LGDs for senior and exposures are extrapolated landed floor rates.

subordinate the from rate.

Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 83 Reserve Bank of Fiji Notes to and forming part of the financial statements For the year ended 31 July 2020 2.
Statement of significant accounting policies and statutory requirements - continued (e) Financial instruments - continued Period over which ECL is measured Expected credit loss is measured from the initial recognition of the financial asset.

The maximum period considered when measuring ECL is the maximum contractual period over which the Bank is exposed to credit risk.
The total ECL is recognised in the loss allowance for the financial asset unless the total ECL exceed the gross carrying amount of the asset, in which case the ECL is recognised as a provision.

(f) Gold Gold is valued at the market price ruling at period end.

Revaluation gains and losses on gold due to change in fair value are transferred to asset revaluation reserve.

Currency translation gains and losses on gold are transferred to the Revaluation reserve - foreign currency account.
(g) Numismatic items The Bank sells or receives royalties on notes and coins which are specifically minted or packaged as numismatic items.

These numismatic items have not been accounted for as currency in circulation as they are not issued for monetary purposes.
In terms of Section 55(2) of the Reserve Bank of Fiji Act, 1983, the Minister for Economy has specified by notice made under the provisions of paragraph (b) of the provision to Section 31 of the Act that the Bank shall not be required to include the face value of these numismatic items in circulation in its financial statements.

It is considered that no material liability will arise in respect of these numismatic items.
(h) Cash and cash equivalents For the purposes of the statement of cash flows, cash and cash equivalents includes cash held at bank, short- term commercial paper and current accounts with original maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in fair value and are used by the Bank in the management of its short term commitments.
(i) Currency inventory Currency inventory relates to notes and coins purchased for circulation and include the new notes and coins design series.

The amount expensed in profit or loss is based on the cost of producing legal tender notes and coins that are issued for circulation and adjustments for write-offs relating to superseded design notes and coins series.

Currency costs is determined on a first-in, first-out basis.
(j) Loans and advances Loans are carried at recoverable amount represented by the gross value of the outstanding balance adjusted for an allowance for bad and doubtful debts.

A provision for impairment allowances is made based on expected loss rates.

Movement in the provision is charged to profit or loss.

All known bad debts are written off against the provision in the period in which they are recognised.
Bad debts, in respect of which no specific provisions have been established, are charged directly to profit or loss.

84 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 85 Reserve Bank of Fiji Notes to and forming part of the financial statements For the year ended 31 July 2020 2.
Statement of significant accounting policies and statutory requirements - continued (k) Demand deposits Demand deposits representing funds placed with the Bank by financial institutions and other organisations are brought to account on a cost basis.

These deposits are at call.

Interest is paid on demand deposits of commercial banks held with the Bank.

(l) Currency in circulation The exclusive rights of national currency issue are vested with the Bank.
Currency in circulation comprises notes and coins issued by the Bank and represent a claim on the Bank in favour of the holder.

Currency in circulation relates to the issue of notes and coins and demonetised currency that has yet to be redeemed, less notes and coins redeemed.

The liability for currency in circulation is recorded at face value.
(m) Property, plant and equipment Recognition and measurement Freehold land and buildings are measured at fair value, based on valuations by an independent registered valuer less subsequent depreciation and impairment losses.

Valuations are performed with sufficient regularity to ensure that the fair value of a revalued asset does not differ materially from its carrying amount.
Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset, and the net amount is restated to the revalued amount of the asset.

All other property, plant and equipment is stated at historical cost less depreciation.

Cost includes expenditures that are directly attributable to the acquisition of the asset.
Depreciation Items of capital expenditure, with the exception of freehold land, are depreciated on a straight line basis over the following estimated useful lives: Buildings Building improvements Motor vehicles Computers and equipment 50 years 5-15 years 6 years 4-5 years Plant & machinery, equipment & furniture & fittings 5-10 years Assets are depreciated from the date of acquisition.
Expenditure on repairs and maintenance of property, plant and equipment incurred which does not add to future economic benefits expected from the assets is recognised as an expense when incurred.

(n) Statutory reserve deposit Under Section 40 of the Reserve Bank of Fiji Act, 1983, the Reserve Bank may specify the reserves required, by each financial institution, to be maintained against deposits and other similar liabilities.
The statutory reserve deposit is a direct monetary policy tool that is used from time to time to complement the RBF’s market based policy instrument.

The last time the RBF changed the statutory reserve deposit was in 2010 when it was raised from 8.5% to 10%.

Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 85 Reserve Bank of Fiji Notes to and forming part of the financial statements For the year ended 31 July 2020 2.
Statement of significant accounting policies and statutory requirements - continued (o) Intangible assets Acquired intangible assets are initially recorded at their cost at the date of acquisition being the fair value of the consideration provided plus incidental costs directly attributable to the acquisition.
Intangible assets with finite useful lives are amortised on a straight line basis over the estimated useful lives of the asset being the period in which the related benefits are expected to be realised (shorter of legal duration and expected economic life).

Amortisation rates and residual values are reviewed annually and any changes are accounted for prospectively.

The annual amortisation rate used for intangible assets is 25%.
(p) Impairment The carrying amounts of the Bank’s assets are reviewed periodically to determine whether there is any indication of impairment.

If any such indication exists, the assets recoverable amount is estimated.

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount.

Impairment losses are recognised in profit or loss.
(q) Employee entitlements Short-term benefits Short-term employee benefits comprising annual leave and entitlement to Fiji National Provident Fund are measured on an undiscounted basis and are expensed as the related service is provided.

Other long-term employee benefits The Bank’s net obligation in respect of long-term benefits is the amount of future benefit that employees have earned in return for their service in the current and prior period; that benefit is discounted to determine its present value.
The discount rate is based on the domestic bond portfolio.

(r) Income tax The Bank is exempt from income tax in accordance with Section 57 of the Reserve Bank of Fiji Act, 1983.

(s) Revenue recognition Interest income Interest income is brought to account on an accruals basis using the effective interest method.

Income from financial instruments Gains and losses realised from the sale of financial instruments are reflected in profit or loss at the time of transaction.
86 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 87 Reserve Bank of Fiji Notes to and forming part of the financial statements For the year ended 31 July 2020 2.

Statement of significant accounting policies and statutory requirements - continued (s) Revenue recognition - continued Other income Rental income is brought to account as the performance obligations are satisfied over time.

All rents are payable within a 30 day period.


All other income sources are generally brought to account as the performance obligations are satisfied at a point in time.

(t) Operating leases Where the Bank is the lessee, the lease rentals payable on operating leases are recognised in profit or loss over the term of the lease.

Where the Bank is the lessor, the assets leased out are retained in property, plant and equipment and the related income is brought to account evenly over the period of the lease.
(u) Comparative figures Where necessary, comparative figures have been reclassified or regrouped to conform to changes in presentation in the current period.

(v) Rounding Amounts in the financial statements are rounded to the nearest thousand dollars unless otherwise stated.

3.
3.

Critical accounting estimates and judgements Estimates and judgments are continually evaluated and based on historical experiences and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Bank makes estimates and assumptions concerning the future.

The resulting accounting estimates will, by definition, seldom equal to the related actual results.
The estimates and assumptions that have a risk of causing material adjustment to the carrying amount of assets and liabilities within the next financial period are as follows: - Fair value of financial assets accounted for at FVOCI – refer Note 21 - Determination of expected credit losses for financial assets – refer Note 20(c) - Valuation of properties – refer Note 11 When determining fair value, the Bank has considered the actual and potential impacts on the value of its financial assets from the COVID-19 pandemic.
Where, in the judgement of the Bank, the financial assets have been or will be temporarily impacted by the COVID-19 pandemic, the assessed value of the impact is deducted when deriving the fair value.

Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 87 Reserve Bank of Fiji Notes to and forming part of the financial statements For the year ended 31 July 2020 3.
Critical accounting estimates and judgements - continued Impact of COVID-19 Background The rapid spread of COVID-19 served a severe blow to the global economy that was on the cusp of a modest revival after a synchronised slowdown last year.

Global growth prospects have weakened markedly as domestic demand collapsed amidst the standstill in international travel and plunge in global trade.

Governments responded by introducing stimulus packages to contain the virus and support the economy.
On their part, central banks reduced interest rates and injected liquidity to boost credit creation and support economic activity.

The Fiji economy is not immune to the impact of the Coronavirus.

Already slowing from the second half of 2019, the onset of the pandemic earlier this year escalated the downturn in economic activity.
Given the considerable uncertainties, the extent of the overall damage will depend on how soon and effectively the outbreak is contained domestically, the resumption of international travel and ensuing pick-up in tourism-related activities over the coming months.

Consideration of the financial statements and further disclosures The Bank has carefully considered the impact of COVID-19 in preparing its financial statement for the year ended 31 July 2020.
The key impacts on the financial statements, including the application of critical estimates and judgements, are as follows: Expected Credit Loss (ECL) Provision In assessing the Expected credit loss provision, the Bank has incorporated the effects of COVID-19 globally as well as domestically.
Due to the non-availability of the latest Standard & Poor’s report, the Bank has applied the 2020 global and domestic forecast of -4.9% and -21.7% to adjust the Probability of Default (PD) on its financial assets to account for the impact of the COVID-19 pandemic.

In assessing this, the Bank has recorded as additional ECL provision of $0.58m in accordance with the requirement of IFRS 9.
Fair Value Measurement When estimating fair value, the Bank has considered the actual and potential impacts on the value of its investments due to the COVID-19 pandemic.

Where, in the judgement of the Bank, an investment has been impacted by the pandemic, the assessed value of the impact is deducted when deriving the fair value.
88 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 89 Reserve Bank of Fiji Notes to and forming part of the financial statements For the year ended 31 July 2020 4.
Revenue and expenses (a) Interest income Overseas investments International Monetary Fund Domestic securities Financing facilities Staff loans (b) Other revenue Rent received Numismatic sales License and application fees Foreign currency trading gains Amortisation of fair value reserve Other miscellaneous income (c) Interest expense International Monetary Fund Other (d) Administration expenses Staff costs Other costs Total number of employees at period end (e) Other expenses Depreciation Amortisation of intangible assets Auditor’s remuneration - Audit fees Board remuneration Currency issue Numismatic (f) Allowance for impairment losses Movement of the ECL provision during the year is as follows: Foreign currency assets Short term commercial paper and Current accounts Marketable securities Other assets Local currency assets Domestic securities Financing facilities Other assets 31 July 2020 $000 37,436 1,147 13,919 2,219 48 54,769 476 1,396 500 1,392 921 385 5,070 1,047 13 1,060 15,667 4,734 20,401 199 2,185 164 51 29 4,278 23 6,730 (19) 104 (42) 359 166 10 578 31 July 2019 $ Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 89 Reserve Bank of Fiji Notes to and forming part of the financial statements For the year ended 31 July 2020 5.
External reserves Short-term commercial paper Current accounts Less: Allowance for impairment losses Marketable securities - Fixed term deposits - Bonds Less: Allowance for impairment losses Gold International Monetary Fund - Reserve tranche position - Special drawing rights 31 July 2020 $000 125,844 146,756 272,600 (12) 272,588 31 July 2019 $000 245,906 155,414 401,320 (31) 401,289 78,754 1,546,244 1,624,998 103,463 1,376,546 1,480,009 (146) (42) 1,624,852 1,479,967 3,456 2,581 73,161 131,960 205,121 72,384 131,009 203,393 Total External reserves 2,106,017 2,087,230 Under the provisions of Section 31 of the Reserve Bank of Fiji Act, 1983, the value of the External reserves provided for in Section 30 shall not be less than 50% of the total Demand liabilities of the Bank.
At 31 July 2020, the value of the External reserves was 78% (2019: 88%) of total Demand liabilities.

The allowance for impairment losses is provided on the short term commercial paper, current accounts and marketable securities in accordance with the requirements of IFRS 9 and takes into account the impact of COVID-19.

6.

Domestic Securities Domestic securities principally comprise investment in the Fiji Government bonds.
During the year, $0.95m (2019: $1.15m) was amortised in respect of securities held in the Domestic Bond Portfolio.
Movement of Hold-to-collect financial assets Opening balance Acquisitions Redemptions Amortisation Less: Allowance for impairment losses Closing balance 31 July 2020 $000 166,604 304,449 (102,863) (947) 367,243 (621) 366,622 31 July 2019 $000 81,450 104,393 (18,085) (1,154) 166,604 (262) 166,342 An allowance for impairment losses has been provided on the Bank’s domestic securities in accordance with the requirements of IFRS 9 and takes into account the impact of COVID-19.
90 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 91 Reserve Bank of Fiji Notes to and forming part of the financial statements For the year ended 31 July 2020 7. Financing facilities Import Substitution and Export Finance Facility Natural Disaster Rehabilitation Facility Housing Facility Less: Allowance for impairment losses 31 July 2020 $000 133,617 92,873 58,548 285,038 (363) 284,675 31 July 2019 $000 103,489 14,327 41,134 158,950 (197) 158,753 The RBF has three financing facilities that have been approved by the Board with a total approved limit of $500 million as at 31 July 2020 ($340 million: 2019) provided as back-to-back financing to various financial institutions at concessional rates of interest and varying maturities of up to 5 years.
The aim of these facilities are to support import and export substitution businesses, assist businesses and home owners affected by natural disasters and assist first home buyers to own a home, respectively.

Credit guidelines are determined by the financial institutions that tap into these facilities on behalf of their clients as ultimately, they bear the credit risk.
The allowance for impairment losses is provided on the Bank’s financing facilities in accordance with the requirements of IFRS 9 and takes into account the impact of COVID-19.

Currency inventory 31 July 31 July 8.

Movement of currency inventory Opening balance Consignments received Currency issued Closing balance 9.
Other assets 2020 $000 23,382 923 (4,277) 20,028 31 July 2020 $000 2019 $000 19,903 7,259 (3,780) 23,382 31 July 2019 $000 Accrued interest Currency prepayments Prepayments and other receivables Staff loans and advances 1,854 277 1,220 921 4,272 (17) 4,255 Currency prepayments represent advance payment for the purchase of notes and coins.
The allowance for impairment losses is provided on accrued interest and staff loan and advances in accordance with the requirements of IFRS 9 and takes into account the impact of COVID-19.

Intangible assets 7,552 - 1,012 1,004 9,568 (30) 9,538 Less: Allowance for impairment losses 31 July 31 July 10.
Reserve Bank of Fiji Annual Report Cost Opening balance Acquisitions Disposals Transfers from work in progress Closing balance Accumulated amortisation Opening balance Amortisation charge for the period Disposal Closing balance Carrying amount Opening balance Closing balance 2020 $000 4,594 6 - - 4,600 3,884 164 - 4,048 710 552 2019 $000 4,108 528 (42) - 4,594 3,790 136 (42) 3,884 318 710 Reserve Bank of Fiji Annual Report 91 Reserve Bank of Fiji Notes to and forming part of the financial statements For the year ended 31 July 2020 10.
Intangible assets - continued Intangible assets include costs incurred in acquiring the Bank’s computer software.

Computer software is capitalised on the basis of costs incurred to acquire and bring to use the specific software.

11.
Property, plant and equipment Freehold land and buildings Building Improve- ments Motor vehicles Computers and equipment Work in progress Total Plant & machinery, equipment & furniture & fittings $000 $000 $000 $000 $000 $000 $000 Cost/Valuation Balance at 1 August 2018 Additions Transfer from work in progress Revaluations Write-down on revaluation Disposals Balance at 31 July 2019 Balance at 1 August 2019 Additions Transfers from work in progress Revaluations Write-down on revaluation Disposals Balance at 31 July 2020 Accumulated depreciation Balance at 1 August 2018 Depreciation for the period Transfers Depreciation reversal on revaluation Depreciation on disposals Balance at 31 July 2019 Balance at 1 August 2019 Depreciation for the period Transfers Depreciation reversal on revaluation Depreciation on disposals Balance at 31 July 2020 Carrying amount Balance at 1 August 2018 Balance at 31 July 2019 Balance at 31 July 2020 34,928 - - 4,856 (5,466) - 34,318 34,318 4 - - - - 34,322 3,995 1,542 - (5,466) - 71 71 1,655 - - - 1,726 30,933 34,247 32,596 1,194 171 - - - - 1,365 1,365 20 - - - - 1,385 966 66 - - - 1,032 1,032 94 - - - 1,126 228 333 259 461 155 - - - (84) 532 532 - - - - - 532 366 45 - - (84) 327 327 60 - - - 387 95 205 145 3,061 328 - - - - 3,389 3,389 311 - - - (76) 3,624 2,406 333 - - - 2,739 2,739 318 - - (76) 2,981 655 650 643 2,089 34 - - - - 2,123 2,123 127 - - - - 2,250 1,701 51 - - - 1,752 1,752 58 - - - 1,810 388 371 440 524 282 (686) - - - 120 120 855 (462) - - - 513 - - - - - - - - - - - - 42,257 970 (686) 4,856 (5,466) (84) 41,847 41,847 1,317 (462) - - (76) 42,626 9,434 2,037 - (5,466) (84) 5,921 5,921 2,185 - - (76) 8,030 524 120 513 32,823 35,926 34,596 A valuation of the Bank’s freehold land and buildings was undertaken in 2019 by independent registered valuers Rolle Associates.
Based on the independent valuations, a revaluation increment of $4.9m was recognised in the financial statements as at 31 July 2019.

These level 3 valuations were done on a capitalisation of income approach which applies a capitalisation rate to the potential net income for commercial properties, and a market approach to other properties.
92 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 93 Reserve Bank of Fiji Notes to and forming part of the financial statements For the year ended 31 July 2020 12.
Demand deposits Foreign International Monetary Fund Local Banks’ exchange settlement balances Fiji Government State NBF Trust account International Monetary Fund Other depositors 31 July 2020 $000 31 July 2019 $000 123 134 765,240 506,557 1,231 1,380 818 10,550 779,219 1,257 1,380 835 3,920 513,949 State NBF Trust Account In accordance with an agreement dated 12 September 1996 between the Fiji Government, the Reserve Bank of Fiji and NBF AMB, where the State established a trust account, known as the State NBF Trust Account, with the Reserve Bank of Fiji, on the basis, among other things, that all money in the trust account is the property of the Fiji Government at all times.
The purpose of the State NBF Trust Account is to meet the obligations of the AMB.

The National Bank of Fiji Restructuring Act, 1996, provides that the State, the Reserve Bank of Fiji and AMB may at any time enter into one or more deeds, agreements, arrangements and understandings relating to the performance by the State of its obligations under the guarantees of deposits with AMB.
From 1 April 2007, under Section 30(2)(c)(i) of the Banking Act, 1995, Cabinet agreed that the Bank assume controllership and the ultimate winding down process of the AMB.

It also permits the Bank to use money from the State NBF Trust Account to meet any controllership expenses.

13.
13.

Payable to the Fiji Government Net profit for the year Transfer to General reserve One-fifth balance of ‘Revaluation reserve account - foreign currency’ 31 July 2020 $000 30,123 (1,000) 2,689 31,812 31 July 2019 $000 28,894 (1,000) 1,491 29,385 The amount payable to the Fiji Government is made in accordance with Section 8(3) of the Reserve Bank of Fiji Act, 1983.

The balance payable at 31 July 2019 was paid in full to the Fiji Government during the year.

14.
14.

Currency in circulation Notes Coins 31 July 2020 $000 803,997 66,657 870,654 31 July 2019 $000 787,814 64,405 852,219 The exclusive rights of national currency issue are vested with the Bank.

Currency in circulation comprises notes and coins issued by the Bank and represent a claim on the Bank in favour of the holder.

Currency in circulation relates to the issue of notes and coins and demonetised currency that have yet to be redeemed, less notes and coins redeemed.
The liability for currency in circulation is recorded at face value.

Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 93 Reserve Bank of Fiji Notes to and forming part of the financial statements For the year ended 31 July 2020 15.
Other liabilities Employee entitlements MSME Credit Guarantee Scheme Accruals Other liabilities Movements in employee entitlements: Opening balance Net movement during the period Closing balances 31 July 2020 $000 2,024 5,743 1,163 1,698 10,628 1,776 248 2,024 31 July 2019 $000 1,776 3,908 1,581 1,612 8,877 1,525 251 1,776 The micro small and medium enterprises (MSME) credit guarantee scheme is a Government guarantee to pay up to 60% of the principal outstanding on defaulted MSME loans to a limit of $60,000 per business.
Government will also guarantee 75% of the principal outstanding on defaulted loans up to a limit of $75,000 per business on all MSME loans to women entrepreneurs as well as to those involved in the agriculture, forestry and fisheries sector.

MSME was established in 2012 is administered by the Bank with the total allocation of $9.0m to cover lending to all sectors except for loans to sugar cane farmers and government-subsidised businesses.

16.
16.

Cash and cash equivalents Cash and cash equivalents included in the statement of cash flows comprise of the following: Cash on hand - local currency Cash - foreign currency 31 July 2020 $000 2,206 182,053 184,259 31 July 2019 $000 1,598 240,620 242,218 Cash - foreign currency forms part of short-term commercial paper and current accounts in Note 5.

17.
17.

Share capital 31 July 31 July Authorised capital Issued and paid-up capital 2020 $000 5,000 2,000 2019 $000 5,000 2,000 The authorised capital established under the Reserve Bank of Fiji Act, 1983 is $5,000,000 which may be increased from time to time by any amount proposed by the Board of Directors and approved by the Minister for Economy.

Upon the establishment of the Bank, an initial amount of $2,000,000 was issued by the Fijian Government as paid capital stock.
Any subsequent amount of paid capital stock shall be proposed by the Board of Directors and approved by the Minister for Economy.

18.

Reserves Reserves are maintained to cover the broad range of risks to which the Bank is exposed.

General reserves The General reserves provide for events which are contingent and which are non-foreseeable.
Transfers to this account from the profit payable to the Fiji Government, can only take place following an agreement between the Minister for Economy and the Board of Directors, in accordance with Section 8(1)(c) of the Reserve Bank of Fiji Act, 1983.

At the end of the year, the Minister and the Board of Directors have agreed to transfer $1.0m (2019: $1.0m) into the General reserve from the profits that is payable to the Fiji Government.
94 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 95 Reserve Bank of Fiji Notes to and forming part of the financial statements For the year ended 31 July 2020 18.

Reserves - continued Fair Value reserve This reserve records fair value gains and losses on the Bank’s financial instruments measured at fair value through other comprehensive income.

In 2011 certain domestic securities classified as Available-for-sale at that time, were reclassified to Held-to-maturity.
The fair value gains for these securities that were previously recorded in this reserve is being amortised from the reserve to other revenue over the life of these securities.

During the period $0.92m (2019: $1.13m) has been amortised to other revenue.
Revaluation reserve account - foreign currency Currency translation gains and losses arising from revaluation of Bank’s assets and liabilities in, or denominated in gold or foreign currencies are transferred to the Revaluation reserve account - foreign currency (refer Note 2(a)).

Asset revaluation reserve This reserve records movements between the carrying value and the fair values of the Bank’s property and gold holdings.

The Bank’s freehold land and buildings were revalued in 2019 (refer to Note 11).
As at 31 July 2020, the valuation movements of the Bank’s gold holdings were captured in the Asset revaluation reserve.
The Asset revaluation reserve comprises the following: Asset revaluation reserve Property Opening balance Revaluation Closing balance Gold Opening balance Revaluation Closing balance Total asset revaluation reserve Opening balance Net movement Closing balance 31 July 2020 $000 23,686 - 23,686 1,136 629 1,765 24,822 629 25,451 31 July 2019 $000 18,830 4,856 23,686 885 251 1,136 19,715 5,107 24,822 Management of capital and reserves The Bank’s capital and reserves management focuses on the Bank’s total equity reported in its financial statements.
The main drivers of the reported equity are the reported results and the Bank’s distribution to the Fiji Government.

The Bank’s distribution to the Fiji Government is determined under the provisions of the Reserve Bank of Fiji Act, 1983 referred to in Note 13.

The Bank’s main capital management objective is to have adequate reserves to effectively carry out its statutory responsibilities.
The Bank assesses the extent of the financial risks and the resulting potential for losses arising from its operation.

These financial risks are assessed across the statement of financial position to determine the appropriate amount of equity.

Such assessments are supplemented with analysis and judgement, where appropriate.
Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 95 Reserve Bank of Fiji Notes to and forming part of the financial statements For the year ended 31 July 2020 19. International Monetary Fund The Bank was designated to serve with effect from 17 December 1976 as the Fiji Government's fiscal agent for the purposes of the International Monetary Fund, and assumed the Republic of Fiji’s obligation of membership from that date.
As at 31 July 2020, the Republic of Fiji’s membership subscription to the International Monetary Fund was $295.0m (2019: $293.0m).
Of this amount $73.2m (2019: $72.4m) is shown as Reserve Tranche Position and is included as part of the External reserves of the Reserve Bank (refer Note 5) and the balance representing the Currency subscription portion of $221.8m (2019: $220.6m) is held mainly in the form of a non-interest bearing notes payable on demand, which is subject to an expected credit losses provision of $0.01m (2019: $0.05m).
Special drawing rights holdings (“SDR”) is an interest bearing international reserve asset created by the IMF and is allocated to members on the basis of their quotas in the IMF.

As at balance date this Special drawing rights holdings (asset) had a balance of $132.0m (2019: $131.0m) and is included as part of External reserves of the Bank (refer to Note 5).

IMF - Special drawing rights allocation (liability) with a balance of $201.1m (2019: $199.8m) is included under foreign currency liabilities.
The Poverty Reduction and Growth Facility (PRGF) Trust was established by the IMF to meet the objectives of poverty reduction and growth more central to lending operations in its poorest member countries.

The facility is administered in line with the Heavily Indebted Poor Countries (HIPC) Initiative, and at balance date this account had a balance of $0.6m (2019: 0.6m).
96 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 97 Reserve Bank of Fiji Notes to and forming part of the financial statements For the year ended 31 July 2020 20.

Financial risk management policies a) Introduction and overview The Reserve Bank is involved in policy oriented activities.

The Bank identifies risks and implements controls in its operation and management of foreign reserves holdings.
The main financial risks that the Bank faces include: • liquidity risk • credit risk • market risk • operational risk This note presents information about the Bank’s exposure to each of the above risks, the Bank’s objectives, policies and procedures for measuring and managing risk.

Risk management framework Like most central banks, the nature of the Bank’s operations creates exposures to a range of operational and reputational risks.
The Board of Directors has overall responsibility of the establishment and oversight of the Bank’s risk management framework.

Bank management seeks to ensure that strong and effective risk management and controls systems are in place for assessing, monitoring and managing risk exposures.

The Board of Directors, the Governors and Senior Management are responsible for managing and monitoring the business, strategy, risks and performance of the Bank.
Internal Audit forms part of the Bank’s risk management framework.

This function reports to the Governor and the Board Audit and Risk Committee on internal audit and related issues.

All areas in the Bank are subject to periodic internal audit review.

The majority of the Bank’s financial risk arises from the management of foreign and domestic reserves.

The Middle Office is responsible for monitoring and reporting compliance with various risk limits and policies.
The Bank is subject to an annual external audit.

Both external and internal audit arrangements are overseen by the Board Audit and Risk Committee comprising three of the Board’s Directors.

The Committee meets regularly and reports to the Board of Directors on its activities.

b) Liquidity risk Liquidity risk is the risk that the Bank will encounter difficulty in meeting obligations associated with its financial liabilities that are settled by delivering cash or another financial asset.
Management of liquidity risk To limit the liquidity risk, the Bank maintains an adequate level of reserves and taking into consideration the transaction demand on foreign exchange, ensures that an acceptable amount is maintained in current accounts at all times.

The Bank invests in high quality instruments, including commercial paper and debt issued by Governments and Supranationals, all of which are easily converted to cash (refer to maturity analysis on liquidity).
Exposure to liquidity risk The key measure used by the Bank for managing liquidity risk is the ratio of net Liquid assets to total Demand liabilities.

The Bank’s investment guidelines requires that minimum value of foreign currency assets to be held at any point shall not be less than 50% of the total Demand liabilities of the Bank.

(Demand liabilities include currency in circulation but exclude non-interest bearing notes issued to international financial institutions).
As at 31 July 2020, the value of External reserves was 78% (2019: 88%) of the total Demand liabilities.

Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 97 Reserve Bank of Fiji Notes to and forming part of the financial statements For the year ended 31 July 2020 20.
Financial risk management policies - continued b) Liquidity risk - continued Maturity analysis as at 31 July 2020 The maturity analysis noted below includes all financial and non-financial assets and liabilities as at 31 July 2020.
0-3 Months $000 3-12 Months $000 1-5 Years Over 5 Years No Specific Maturity $000 $000 $000 Total $000 Foreign currency assets Short-term commercial paper and Current accounts Marketable securities Gold Accrued interest IMF - Reserve tranche position - Special drawing rights - PRGF - HIPC Trust - Currency subscription Local currency assets Cash on hand Domestic securities Financing facilities Currency inventory Other assets Intangibles Property, plant and equipment - - - - - - - - - - 182,053 90,535 - 254,141 548,766 821,945 - - - - - - - - - - 582 - 639,301 822,527 3,456 13,665 73,161 131,960 - 221,803 880,239 2,206 - 362 20,028 9,538 - - - 302 - 39,659 326,661 4,788 279,525 - - - - - - - - - - - - - 32,134 5,090 319,184 326,661 - - - - - - - - - - - - - - 552 34,596 35,148 272,588 1,624,852 3,456 13,665 73,161 131,960 582 221,803 2,342,067 2,206 366,622 284,675 20,028 9,538 552 34,596 718,217 Total assets 912,373 644,391 1,141,711 326,661 35,148 3,060,284 Foreign currency liabilities Demand deposits IMF - PRGF - HIPC Trust IMF - Special drawing rights allocation Local currency liabilities Demand deposits Payable to the Fiji Government Currency in circulation Statutory reserve deposit IMF - Notes currency subscription Other liabilities Total liabilities Net assets 98 Reserve Bank of Fiji Annual Report 123 - - 123 779,219 31,812 - - - - - - - - - - - - 4,885 815,916 816,039 5,743 5,743 5,743 - 582 - 582 - - - - - - - 582 - - - - - - - - - - - - - - 201,122 201,122 - - 870,654 843,799 220,985 - 123 582 201,122 201,827 779,219 31,812 870,654 843,799 220,985 10,628 1,935,438 2,757,097 2,136,560 2,958,924 96,334 638,648 1,141,129 326,661 (2,101,412) 101,360 Reserve Bank of Fiji Annual Report 99 Reserve Bank of Fiji Notes to and forming part of the financial statements For the year ended 31 July 2020 20.
Financial risk management policies - continued b) Liquidity risk - continued Maturity analysis as at 31 July 2019 The maturity analysis noted below includes all financial and non-financial assets and liabilities as at 31 July 2019.
0-3 Months $000 3-12 Months $000 1-5 Years Over 5 Years No Specific Maturity $000 $000 $000 Total $000 Foreign currency assets Short-term commercial paper and Current accounts Marketable securities Gold Accrued interest IMF - Reserve tranche position - Special drawing rights - PRGF - HIPC Trust - Currency subscription Local currency assets Cash on hand Domestic securities Financing facilities Currency inventory Other assets Intangibles Property, plant and equipment - - - - - - - - - - 240,602 160,687 - 244,317 472,834 762,816 - - - - - - - - - - 578 - 633,521 763,394 2,581 17,685 72,384 131,009 - 220,581 929,159 1,598 24,817 17,264 23,382 4,255 - - - 77,885 16,450 - - - - - 39,337 24,303 125,039 - - - - - - - - - 71,316 94,335 164,376 24,303 - - - - - - - - - - - - - - 710 35,926 36,636 401,289 1,479,967 2,581 17,685 72,384 131,009 578 220,581 2,326,074 1,598 166,342 158,753 23,382 4,255 710 35,926 390,966 Total assets 1,000,475 727,856 927,770 24,303 36,636 2,717,040 Foreign currency liabilities Demand deposits IMF - PRGF - HIPC Trust IMF - Special drawing rights allocation Local currency liabilities Demand deposits Payable to the Fiji Government Currency in circulation Statutory reserve deposit IMF - Notes currency subscription Other liabilities Total liabilities Net assets 134 - - 134 513,949 29,385 - - - - - - - - - - - - 4,969 548,303 548,437 3,908 3,908 3,908 - 578 - 578 - - - - - - - 578 - - - - - - - - - - - - - - 199,790 199,790 - - 852,219 801,007 219,792 - 134 578 199,790 200,502 513,949 29,385 852,219 801,007 219,792 8,877 1,873,018 2,425,229 2,072,808 2,625,731 452,038 723,948 927,192 24,303 (2,036,172) 91,309 Reserve Bank of Fiji Annual Report 99 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Notes to and forming part of the financial statements For the year ended 31 July 2020 20.
Financial risk management policies - continued c) Credit risk Credit risk relates to the risk of loss to the Bank from the failure of a counter-party to a transaction to meet its contractual obligations and arises principally from the Bank’s investments and loans and advances to customers and other banks.

For risk management purposes, the Bank prescribes minimum credit ratings acceptable for investment and specifies the maximum permissible credit exposure to individual banks and countries.
The minimum credit ratings for investments are Pl/A3 for short-term debt and Pl/Aaa for long-term.

The Bank uses Standard and Poor’s, Moody’s and Fitch credit ratings for assessing the credit risk of foreign counterparties.

The credit ratings of counterparties, which are used in the calculation of the expected credit losses allowances, are closely monitored and are updated as new market information becomes available.

Foreign exchange limits per bank are imposed for all currency dealings.
The total exposure of credit risk in the Bank’s portfolio is as follows: Foreign currency assets Short-term commercial paper and current accounts Marketable securities International Monetary Fund Gold Accrued Interest Less: Allowance for impairment losses Local currency assets Domestic securities Financing facilities Cash on hand Other assets Less: Allowance for impairment losses 31 July 2020 $000 272,600 1,624,998 427,506 3,456 13,668 2,342,228 (161) 2,342,067 367,243 285,038 2,206 8,556 663,043 (1,014) 662,029 3,004,096 The Bank monitors credit risk by currency and sector.
An analysis of concentrations of credit risk is shown below: Concentration by currency USD YEN GBP EURO AUD NZD SDR FJD Less: Allowance for impairment losses Total financial assets 100 Reserve Bank of Fiji Annual Report 31 July 2020 31 July 2019 $000 709,747 84,140 112 79,320 612,869 428,499 427,541 663,043 3,005,271 (1,175) 3,004,096 % 24 3 - 3 20 14 14 22 - 100 $000 761,070 94,419 873 78,622 587,933 378,139 425,117 329,949 2,656,122 (597) 2,655,525 31 July 2019 $000 401,320 1,480,009 424,597 2,581 17,688 2,326,195 (118) 2,326,077 166,604 158,950 1,598 2,775 329,927 (479) 329,448 2,655,525 % 29 4 - 3 22 14 16 12 - 100 Reserve Bank of Fiji Annual Report 101 Reserve Bank of Fiji Notes to and forming part of the financial statements For the year ended 31 July 2020 20.
Financial risk management policies - continued c) Credit risk - continued Concentration by sector Foreign currency assets Central banks Commercial banks Government Semi Government Supranational International Monetary Fund Others Less: Allowance for impairment losses Local currency assets Government and statutory bodies Commercial banks Others Less: Allowance for impairment losses 31 July 2020 $000 153,915 384,659 814,925 26,676 520,855 427,506 13,692 (161) 2,342,067 581,561 72,926 8,556 (1,014) 662,029 % 7 16 35 1 22 18 1 - 100 88 11 1 - 100 31 July 2019 $000 200,034 549,961 640,666 3,023 490,217 424,597 17,697 (118) 2,326,077 288,509 38,643 2,775 (479) 329,448 % 9 24 28 - 21 18 - - 100 88 12 - - 100 Total financial assets 3,004,096 2,655,525 Credit exposure by credit rating The Bank averages the credit ratings provided by the above agencies, rounded down to the lower rating in case the composite is between two ratings.
The rating agencies are evenly weighted when calculating the composite.
An analysis of the credit quality based on Standard and Poor’s, Moody’s and Fitch credit ratings is as follows: Summary by major credit category Foreign currency financial asset by major credit category: Aaa Aa1 Aa2 Aa3 A1 A2 A3 International Monetary Fund Central Banks Others and Not rated Less: Allowance for impairment losses Local currency financial asset by major credit category: Others Less: Allowance for impairment losses Total financial assets 31 July 2020 $000 1,145,514 49,404 93,545 76,674 286,154 39,366 - 427,506 100,944 123,121 (161) 2,342,067 663,043 (1,014) 662,029 3,004,096 % 49 2 4 3 12 2 - 19 4 5 - 100 100 - - 100 31 July 2019 $000 885,543 15,583 96,929 420,059 103,845 51,996 - 424,597 200,034 127,609 (118) 2,326,077 329,927 (479) 329,448 2,655,525 % 38 1 4 18 5 2 - 18 9 5 - 100 100 - - 100 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 101 Reserve Bank of Fiji Notes to and forming part of the financial statements For the year ended 31 July 2020 20.
Financial risk management policies - continued c) Credit risks - continued Credit exposure by credit rating - continued Foreign currency assets under ‘Others and Not Rated’ include financial instruments held with other commercial banks.

Local currency assets under ‘Others’ include financial instruments held with the Fiji Government, the Fiji Sugar Corporation Limited and staff loans and advances.
d) Market risks Market risk is the risk that relates to changes in market prices such as interest rates and foreign exchange rates.

The objective of market risk management is to manage and control market risk exposures within acceptable parameters while optimising the return on risk.
Interest rate risk management The principal risk to which trading portfolio is exposed is the risk of loss from fluctuations in future cash flows or fair value of financial instruments because of a change in market interest rates.

The Bank limits interest rate risk by modified duration targets.

The investment strategy in relation to the duration for the total portfolio is six months.

The duration of the portfolio is re-balanced regularly to maintain the targeted duration.
Foreign exchange risk management Exchange rate risk relates to the risk of loss of foreign reserves arising from changes in the exchange rates against the Fijian dollar.

The Bank has adopted a currency risk management policy, which maintains the Fijian dollar value of the foreign reserves and manages the fluctuations in the Revaluation reserve account - foreign currency.
The Bank’s exposure to foreign exchange risk, based on notional amounts, was as follows: Notional carrying amounts as at 31 July 2020 USD $000 YEN 000 GBP 000 EURO 000 AUD $000 NZD $000 Foreign currency assets Short-term commercial paper and Current account Marketable securities Gold Accrued interest International Monetary Fund - Reserve tranche position - Special drawing rights - PRGF - HIPC Trust - Currency subscription Total foreign currency assets 33,577 4,153,974 296,881 1,629 2,480 - - - - 334,567 - - - - - - - 4,153,974 Foreign currency liabilities Demand deposits IMF - PRGF - HIPC Trust IMF - Special drawing rights allocation Total foreign currency liabilities Carrying amount - - - - 334,567 - - - - 4,153,974 40 - - - - - - - 40 - - - - 40 77 16,600 64,532 31,318 381,915 235,380 - 174 - - - - 31,569 - - - - 31,569 - 3,405 - 1,923 - - - - 401,920 - - - - 401,920 - - - - 301,835 - - - - 301,835 SDR 000 - - - (1) 24,406 44,022 194 73,994 142,615 (41) (194) (67,094) (67,329) 75,286 102 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 103 Reserve Bank of Fiji Notes to and forming part of the financial statements For the year ended 31 July 2020 20.
Financial risk management policies - continued d) Market risks - continued Notional carrying amounts as at 31 July 2019 USD $000 YEN 000 GBP 000 EURO 000 AUD $000 NZD $000 SDR 000 Foreign currency assets Short-term commercial paper and Current account 82,115 5,240,629 Marketable securities Gold Accrued interest International Monetary Fund - Reserve tranche position - Special drawing rights - PRGF - HIPC Trust - Currency subscription 266,033 1,192 2,198 - - - - - - - - - - - Total foreign currency assets 351,538 5,240,629 Foreign currency liabilities Demand deposits IMF - PRGF - HIPC Trust IMF - Special drawing rights allocation Total foreign currency liabilities Carrying amount - - - - 351,538 - - - - 5,240,629 7 - - - - - - - 7 - - - - 7 5,375 20,117 - 173 - - - - 25,665 - - - - 25,665 415,084 - 5,803 - - - - 421,062 - - - - 421,062 175 9,111 257,134 - 2,327 - - - (6) - - - - 24,307 43,993 194 74,086 268,572 142,574 - - - - 268,572 (45) (194) (67,090) (67,329) 75,245 The following significant exchange rates were used at period end to convert foreign currency balances to the Fijian dollar equivalent.
Reporting date spot rate USD YEN GBP EURO AUD NZD SDR 31 July 31 July 2020 0.4714 49.37 0.3600 0.3980 0.6558 0.7044 0.3336 2019 0.4619 50.18 0.3802 0.4141 0.6719 0.6982 0.3358 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 103 Reserve Bank of Fiji Notes to and forming part of the financial statements For the year ended 31 July 2020 20.
Financial risk management policies - continued d) Market risks - continued Sensitivity analysis for exchange rate A 10% strengthening and a 10% weakening of the Fijian dollar against the above currencies at 31 July would have the following impact on equity as shown below.
Effect on equity - Increase in equity/(Decrease in equity) Strengthening by 10% Weakening by 10% Period end USD YEN GBP EURO AUD NZD SDR 31 July 2020 $000 (64,521) (7,649) (10) (7,211) (55,715) (38,954) (38,864) 31 July 2019 $000 (69,188) (9,494) (2) (5,634) (56,970) (34,969) (38,598) FJD impact (212,924) (214,855) 31 July 2020 $000 78,859 9,349 12 8,813 68,097 47,611 47,500 260,241 31 July 2019 $000 84,563 11,604 2 6,886 69,630 42,740 47,176 262,601 e) Operational Risk Management Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Bank’s processes, personnel, technology and infrastructure and from external factors other than liquidity, credit and market risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour.
Operational risk arises from all of the Bank’s operations.

Managing operational risk in the Bank is an integral part of day-to-day operations and oversight.

This includes adherence to Bank wide corporate policies.

There is also an active internal audit function carried out on a quarterly basis.

To reduce operational risks in foreign reserves operations there is a clear segregation of duties between the Front Office (dealing) and the Back Office (settlements function).
The Front Office comprises teams of officers (dealers) who are duly authorised to transact on behalf of the Bank.

The Back Office comprises officers who independently process and settle all the deals undertaken by the Front Office.

The primary responsibility for the development and implementation of controls to address operational risk is assigned to Senior Management within each business group.
This responsibility is supported by the development of overall and business group-specific policies and procedures.

The Middle Office and Internal and External Audit functions also ensure that operational risk is effectively minimised and managed.

104 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 105 Reserve Bank of Fiji Notes to and forming part of the financial statements For the year ended 31 July 2020 21.
Fair values of financial assets and liabilities The fair value of an instrument is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, and willing parties in an arm’s length transaction.

Quoted market values represent fair value when a financial instrument is traded in an organised and liquid market that is able to absorb a significant transaction without moving the price against the trader.
The valuation of the Bank’s financial assets and liabilities are discussed below: External reserves The reported value of External reserves is considered to be its fair value due to the short-term nature of the financial assets.

Bonds are valued at mark to market.

Domestic securities The fair value of the Bank’s Domestic securities is $391.97m (2019: $180.14m), based on quoted market prices.
Statutory reserve deposits The carrying value of Statutory reserve deposits are considered to approximate their fair value as they are denominated in cash.

Demand deposits The carrying value of Demand deposits are considered to approximate their fair value as they are payable on demand.

Currency in circulation The carrying value of Currency in circulation is considered to be its fair value as reported in the financial statements.
Other financial assets and liabilities The reported values of other financial assets and liabilities are considered to be their fair value.

Valuation of financial instruments The Bank measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements: • Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.

• Level 2: Valuation techniques based on observable inputs either directly (i.e.
as prices) or indirectly (i.e.

derived from prices).

This category includes instruments valued using quoted market prices in active markets for similar instruments; quoted market prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data.
Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 105 Reserve Bank of Fiji Notes to and forming part of the financial statements For the year ended 31 July 2020 21.

Fair values of financial assets and liabilities - continued Valuation of financial instruments - continued • Level 3: Valuation techniques using significant unobservable inputs.
This category includes all instruments where the valuation techniques include inputs not based on observable data and the unobservable inputs have a significant impact on the instrument’s valuation.

This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments.
The table below analyses financial instruments measured at fair value at the end of the reporting period.
Level 1 $000 Level 2 $000 Level 3 $000 Total $000 31 July 2020 Foreign currency assets Available-for-sale financial assets at quoted market price Fiji Government bonds Less: Allowance for impairment losses 31 July 2019 Foreign currency assets Available-for-sale financial assets at quoted market price Fiji Government bonds Less: Allowance for impairment losses 1,440,249 - (136) 1,440,113 1,266,625 - (34) 1,266,591 - 105,995 (3) 105,992 - 109,921 (3) 109,918 - - - - - - - 1,440,249 105,995 (139) 1,546,105 1,266,625 109,921 (37) 1,376,509 During the period ended 31 July 2020, there were no transfers in and out of the fair value hierarchy levels mentioned above.
Sensitivity analysis A 10% strengthening of the quoted market prices against the above foreign available-for-sale financial assets at 31 July would have increased equity by the amounts shown below.

A 10% weakening of market prices at 31 July would have had the equal but opposite effect.
Effect on equity Period end USD EURO AUD NZD FJD impact 31 July 31 July 2020 $000 55,458 7,869 58,236 33,061 154,624 2019 $000 48,832 7,706 54,653 26,464 137,655 106 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 107 Reserve Bank of Fiji Notes to and forming part of the financial statements For the year ended 31 July 2020 22.
Related parties Identity of related parties The Bank has related party relationships with the Board of Directors, the Executive Management and the Fiji Government and NBF AMB.

The members of the Board of Directors during the year were: Ariff Ali – Chairman and Governor Makereta Konrote (Ex-officio member) Pradeep Patel Tevita Kuruvakadua Tony Whitton In April 2007 Cabinet agreed under the Banking Act for the Reserve Bank to assume controllership of the winding down process of NBF AMB.
During the period the following persons were the executives identified as key management personnel, with the greatest authority and responsibility for planning and controlling the activities of the Bank: Ariff Ali Governor Esala Masitabua Deputy Governor Lorraine Seeto Razim Buksh Chief Manager Governor’s Office up to 31 December 2019 Director Financial Intelligence Unit Caroline Waqabaca Chief Manager Financial Markets Susan Kumar Vilimaina Dakai Petaia Tuimanu Poasa Werekoro Praneel Prasad Peni Kunatuba Chief Manager Currency and Corporate Services from 1 April 2020 and Chief Manager Risk Management and Communications up to 31 March 2020 Chief Manager Financial Institutions Chief Manager Economics Chief Manager Financial System Development from 9 January 2020 and Acting Chief Manager Financial System Development up to 8 January 2020 Acting Chief Manager Currency and Corporate Services up to 30 September 2019 Acting Chief Manager Currency and Corporate Services from 1 October 2019 to 31 March 2020 Lanieta Rauqeuqe Acting Chief Manager Risk Management and Communications from 1 April 2020 Subrina Hanif Board Secretary Transactions with related parties In the normal course of its operations, the Bank enters into transactions with related parties identified above.
The transactions with the Board of Directors and Executive Management include the payment of board remuneration and salaries, respectively, and certain benefits, including medical and insurance benefits.

The transactions with Fiji Government include banking services, foreign exchange transactions, registry transactions and purchase of Government securities.
During the year, the Bank earned $20.00m (2019: $16.87m) of interest income relating to their investments in Government securities including foreign currency denominated bonds.

The Bank is also obligated to pay $31.81m (2019: $29.38m) to the Fiji Government in accordance with Section 8(3) of the Reserve Bank of Fiji Act, 1983.

The Bank has interest receivable on Government securities as at 31 July 2020 of $9.83m (2019: $5.79m).
The balance of the Bank’s investment in Government securities including foreign currency denominated bonds at period end amounted to $472.62m (2019: $276.26m).

The Bank also provides an overnight standby facility to the Fiji Government.

At the end of the period, the approved facility of $20m (2019: $20m) was not utilised.

Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 107 Reserve Bank of Fiji Notes to and forming part of the financial statements For the year ended 31 July 2020 22.
Related parties - continued The transactions with the respective related parties are carried out on normal trading terms.

During the period the following transactions were incurred with the related parties: Board remuneration expenses Key management personnel: - Short-term employee benefits - Long-term employee benefits 23.
Commitments Commitments not otherwise provided for in the financial statements and which existed at 31 July 2020 comprise: Foreign exchange transactions: - Sales - Purchases Capital commitments - Other assets 24.

Lease receivable 31 July 2020 $000 29 2,173 55 2,257 31 July 2020 $000 15,971 7,646 31 July 2019 $000 30 2,026 30 2,086 31 July 2019 $000 8,973 9,480 351 38 The Bank leases out certain floors of the Reserve Bank building.
The operating lease rentals receivable are as follows: Receivable not later than one year Receivable later than one year but not later than five years 31 July 2020 $000 519 526 1,045 31 July 2019 $000 186 469 655 25.

Events subsequent to balance date The Bank did not identify any subsequent events precipitated by COVID-19 related developments, which would require adjustment to the amounts or disclosures in the financial statements.
Given the fluid nature of the current situation, the Bank will continue to regularly review forward looking assumptions and forecast economic scenarios.
Apart from the above, there has not arisen in the interval between the end of the period and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Bank, to affect significantly the operations of the Bank, the results of those operations, or the state of affairs of the Bank, in future financial periods.
108 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 109 FIVE-YEAR HISTORICAL INFORMATION Audited 2016 Audited 2016-17 Audited 2017-18 Audited 2018-19 Audited 2019-20 $000 $000 $000 $000 $000 Five Year Financial Position Assets Foreign Currency Local Currency Total Assets Liabilities & Equity Foreign Currency Local Currency Net Assets/Equity 2,211,521 2,541,258 2,400,136 2,326,074 258,896 2,470,417 249,723 270,902 390,966 2,790,981 2,671,038 2,717,040 194,928 190,719 198,696 200,502 2,186,088 89,401 2,518,599 2,394,493 2,425,229 81,663 77,849 91,309 Total Liabilities & Equity 2,470,417 2,790,982 2,671,038 2,717,040 2,342,067 718,217 3,060,284 201,827 2,757,097 101,360 3,060,284 Five Year Financial Performance Income Interest Income Other Income Total Income Expenses Interest Expense Administration Expenses Amortisation of Securities Other Expense Total Expenses Net Profit for the year 27,902 28,284 31,501 28,894 30,123 Five-year Profit and One-fifth balance of Revaluation Reserve Paid to the Fijian Government ($M) Net Profit after transfer to general reserves One-fifth balance of revaluation reserve account Total Payment to Fijian Government Notes: 13.9 3.0 16.9 27.3 2.1 29.4 30.5 2.0 32.5 27.9 1.5 29.4 29.1 2.7 31.8 Details of the financial year periods in the above 5-year historical information are outlined below: • 2016: 1 Jan 2016 to 31 Jul 2016 (7 months) • 2016-17: 1 Aug 2016 to 31 Jul 2017 • 2017-18: 1 Aug 2017 to 31 Jul 2018 • 2018-19: 1 Aug 2018 to 31 Jul 2019 • 2019-20: 1 Aug 2019 to 31 July 2020 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 109 FIJI: KEY ECONOMIC AND FINANCIAL INDICATORS FIJI: KEY ECONOMIC AND FINANCIAL INDICATORS I. GDP1 GDP at Market Price ($ Million) GDP per Capita at Market Price ($)
 Constant Price GDP Growth Rate (%) II.
LABOUR MARKET2 Labour Force Wage and Salary Earners (mid-year) III.

INFLATION (year-on-year % change)3 All Items IV.
EXTERNAL TRADE4 Current Account Balance ($ Million) Capital Account Balance ($ Million) Financial Account Balance ($ Million)5 Current Account Balance (% of GDP) V. FOREIGN EXCHANGE RESERVES ($ Million)8 2015 2016 2017 2018 2019 2020 9,822.1 11,321.2 4.5 10,327.3r 11,852.3r 2.4r 346,214e 199,515e 11,065.0r 12,504.4r 5.4r 356,789e 174,833e 1.6 3.9 2.8 11,650.6r 13,087.6r 3.8r 11,874.1p 13,259.2p -0.4p 9,390.9f 10,423.8f -21.7f n.a n.a 4.8 n.a n.a -0.9 n.a n.a -1.6 -343.0 6.4 -178.4r -3.5 -374.7 9.0 -634.8r -3.6 -743.4 9.1 -703.0r -6.7p -980.6p 10.4p -1,506.3p -1,157.2f 6.9p 6.9f -1,666.3r -1,200.4p -1,137.6f -8.5p -12.9p -12.5f Foreign Reserves 1,943.7 1,921.2 2,272.8 2,012.4 2,219.8 2,107.0 VI.
MONEY AND CREDIT (year-on-year % change)8 Narrow Money Currency in Circulation Quasi-Money Domestic Credit6 VII.

INTEREST RATES (% p.a.

)8 RBF OPR7 Lending Rate Savings Deposit Rate Time Deposit Rate Repurchase Rate VIII.

EXCHANGE RATES (mid rates, F$1 equals: end of period)8 US dollar Real Effective Exchange Rate (January 1999 = 100) IX.
Government Finance ($ Million)9 Total Revenue and Grants Total Expenditure (excluding loan repayments) 13.4 11.7 14.3 13.4 0.50 5.89 1.01 2.71 1.00 4.0 9.5 4.6 7.6 0.50 5.80 0.97 2.95 1.00 13.9 7.1 8.5 5.9 0.50 5.65 1.34 3.21 1.00 1.1r 1.1r 3.1r 9.7r 0.50 5.69 1.32 3.61 1.00 -0.1 2.9 2.5 4.9 0.50 6.30 1.10 4.10 1.00 6.1 2.4 0.6 2.4 0.25 6.14 0.68 3.52 0.50 0.4701 99.86 2015-16 2,908.3 3,292.0 0.4695 102.31 2016-17 2,837.4 3,060.3 0.4874 102.02 2017-18 3,244.4 3,742.2 0.4669 106.23 2018-19 3,181.1 3,600.3 0.4663 102.43 2019-20 2,699.1r 3,536.4r 0.4714 101.26 2020-21 1,673.6b 3,674.6b Sources: Commercial Banks, Fiji Bureau of Statistics, Ministry of Economy, Macroeconomic Committee and Reserve Bank of Fiji Notes: 1 GDP Figures from 2014 to 2020 are based on the 2014 GDP base.
2 For 2015, both the Labour Force and Wage & Salary Earners (mid-year) are sourced from 2015/16 Employment & Unemployment Survey.

3 2020 – July inflation rate (2014 base).

4 Balance of Payments values include aircraft imports and financing.

5 “-” Indicates Net Borrowing i.e.

the economy receives funds from the rest of the world.

6 Credit to the private sector is adjusted for Asset Management Bank’s non-performing loans and advances.

7 The RBF OPR came into effect in 2010.

8 Data for 2020 is July end.


9 Source from the National Budget Supplement.

Key: e - estimate p - provisional b - budgeted r - revised p.a.
- per annum n.a - not available 110 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 111 ABBREVIATIONS ADB AFI AICD AML ATM AUD BCP bp BRS CEMC CFT Asian Development Bank Alliance for Financial Inclusion Australian Institute of Company Directors Anti-Money Laundering Automated Teller Machines Australian dollar Business Continuity Plan basis points Business Resumption Site Consumer Empowerment and Market Conduct Combating the Financing of Terrorism CMADT Capital Markets Advisory and Development Taskforce D.C. DRCF District of Columbia Disaster Rehabilitation and Containment Facility EDRMS Electronic Document Records Management System EFL Energy Fiji Limited EFTPOS Electronic Funds Transfer at Point of Sale FAQ FDB FHRI FIA FIB Frequently Asked Questions Fiji Development Bank Fiji Human Resources Institute Fiji Institute of Accountants Fiji Institute of Bankers FIJICLEAR A type of payment system FinEd FNPF FNU FPPSR FRCS FSC FSP FSR FSSR FTR FY GDP GRCL HA ICF IFC IIA IMF Financial Education Fiji National Provident Fund Fiji National University Fiji Personal Properties Securities Registry Fiji Revenue & Customs Service Fiji Sugar Corporation Financial Service Provider Financial Stability Report Financial Sector Stability Review Financial Transactions Reporting Financial Year Gross Domestic Product General Reserves for Credit Losses Housing Authority Investor Compensation Fund International Finance Corporation Institute of Internal Auditors International Monetary Fund ISEFF Import Substitution and Export Finance Facility IT JPY KFL KPI KPMG KYC Information Technology Japanese Yen Kontiki Finance Limited Key Performance Indicator Klynveld Peat Marwick Goerdeler Know Your Customer LFIs LHS LMCC MC MCTTT MIS Licensed Financial Institutions Left-hand side Labour Management Consultation and Cooperation Macroeconomic Committee Ministry of Commerce, Trade, Tourism and Transport Managed Investment Schemes M-PAiSA A mobile phone money transfer service MSME Micro, Small and Medium Enterprises MSMECGS
 Micro, Small and Medium Enterprises Credit Guarantee Scheme NDA NEC NEER NFA NFIT NZ NZD OF OHS OJK OMO OPR P2P PFIP Net Domestic Assets National Employment Centre Nominal Effective Exchange Rate Net Foreign Assets National Financial Inclusion Taskforce New Zealand New Zealand dollar Order of Fiji Occupational Health and Safety Otoritas Jasa Keuangan Open Market Operations Overnight Policy Rate Person-to-Person Pacific Financial Inclusion Programme PFTAC Pacific Financial Technical Assistance Centre PIRI RBA RBF RBNZ RBV REER RHS ROA ROE RRA SME SPX SRD SWIFT TA TNA TWG US USD USP VAT WEO Pacific Islands Regional Initiative Reserve Bank of Australia Reserve Bank of Fiji Reserve Bank of New Zealand Reserve Bank of Vanuatu Real Effective Exchange Rate Right-hand side Return on Assets Return on Equity Revaluation Reserve Account Small to medium enterprise South Pacific Stock Exchange Statutory Reserve Deposits Society for Worldwide Interbank Financial Telecommunication Technical Assistance Training Needs Analysis Technical Working Group United States US Dollar University of the South Pacific Value Added Tax World Economic Outlook Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 111 RESERVE BANK OF FIJI The great double-hulled, ocean-going canoes (Drua) of the ancient Fijians were remarkable crafts capable of long voyages.
The tagaga (pronounced “tangaga”) or masthead, was crucial for holding in place the sails, woven from the leaves of the pandanus tree.

It was the tagaga which enabled the navigators to keep their drua sailing towards their destinations.

For the Reserve Bank of Fiji, a logo based on the tagaga masthead, symbolises the Bank’s role in contributing towards a sure and steady course for Fiji’s economy.
112 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 113 RESERVE BANK OF FIJI Postal: Private Mail Bag, Suva, Fiji Telephone: (679) 331 3611 Facsimile: (679) 330 2094 Email: info@rbf.gov.fj Website: www.rbf.gov.fj Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report 113 114 Reserve Bank of Fiji Annual Report Reserve Bank of Fiji Annual Report PB