• honourable members, you may be surprised to know that almost 2. 0 percentage points of the 5. 5 percent inflation outcome at july end was driven by higher kava prices. even though kava constitutes only 2. 5 percent of our consumer price index ( cpi ) basket, it contributed substantially to the inflation out - turn. as a result, while yaqona farmers benefitted from the high prices, kava consumers had to fork out significantly more for their favourite brown label drink as prices almost doubled by july and rose three - fold by january this year. • for those of us who don ’ t drink kava, our inflation was effectively around 3 percent. external stability • as a small open economy dependent on imports of a variety of goods such as medicine, food, fuel, machinery, etc. we need to maintain a sufficient level of foreign reserves otherwise there will be pressures on our exchange rate. • the international monetary fund has set a benchmark on the level of foreign reserves which states that it should be sufficient to cover 3 months of import. • for fiji, we like to build in an additional buffer above this benchmark as we are prone to natural disasters, which can affect our export sector including tourism as well as external shocks which can significantly increase our import bill, and in turn significantly impact our foreign reserves. • honourable members, i am pleased to inform that in regards to external stability, fiji ’ s foreign reserves remained well above the benchmark throughout the review period. • at the end of july 2016, our foreign reserves were $ 1, 982 million, just $ 18 million shy of the $ 2 billion mark and was sufficient to cover 5. 5 months of retained imports. • these foreign reserves are what the rbf holds in its accounts. in addition, we have allowed a number of non - bank financial institutions to invest offshore. at the end of july 2016, foreign reserves held by other institutions amounted to more than $ 500 million. financial stability • honourable members, it is paramount that our financial system is safe and sound whereby depositors, pensioners, policyholders and unit holders ’ funds are protected. the safety and soundness of our financial system is also crucial in ensuring the confidence of investors and international agencies. • in this regard, i am pleased to inform the committee that the fijian financial system remains safe and sound supported by a growing asset portfolio which rose marginally from the end of 2015 to july 2016 to just over $ 16 billion. this is almost

certified auditor ’ s copy of the accounts along with the operations report of the bank for the seven months period ending 31 july 2016. • previously when the government ’ s financial year was the calendar year, the rbf ’ s annual report would be submitted to the minister by march 31 each year. last year was the first time that the audited accounts and operations report were presented for the period 1 january 2016 to 31 july 2016. both the accounts and report only cover the first seven months of the 2016 financial year as the last five months ( august to december 2015 ) are accounted for in the bank ’ s 2015 annual report. 3. key outcomes • the objective of central banks is not to maximise profit. its key role is to support economic growth by ensuring that there is price stability, external stability and financial system stability. i will shortly highlight the key outcomes in relation to these three kpis. financial performance • before i elaborate on the three stability objectives, please allow me to quickly highlight our financial performance for the seven month period ending 31 july 2016. • the rbf made a profit of $ 13. 9 million for the seven month period. however, the total amount transferred to government was $ 16. 9 million as it included $ 3. 0 million of the revaluation reserve account ( rra ). • this is in accordance with sections 8 ( 3 ) and 34 of the rbf act which states that one fifth of the rra is to be transferred to the government along with our profits. • this compares with a transfer of $ 32. 2 million to government for the twelve month period ended 31 december 2015. • it may not be appropriate to compare the bank ’ s financial performance in 2016 with 2015 as the periods covered are not the same i. e. seven months in 2016 against 12 months in 2015. • the total profit and revaluation reserve transferred to government in the past five years totalled $ 160. 0 million. price stability • all central banks have the same mandate to ensure that inflation is low and stable. this is no different even for small central banks like us. • as you are well aware, fiji was hit by tropical cyclone ( tc ) winston in february 2016. consequently, the supply of fresh fruits and vegetables and for some of us, the supply of our favourite national drink, kava, was affected. consequently, inflation rose to 5. 5 percent at the end of july 2016 from 1. 6 percent at the end of december 2015.