it is often a path toward hyperinflation. failure to resolve underlying fiscal imbalances combined with rising inflation means nominal funding requirements to close the budget gap keep growing, requiring ever more money to be created, and causing inflation to rise even further. it is a cycle any nation should seek to avoid. in addition, inflation is a hidden tax on holding nominal assets, and when it is unanticipated, it can have significant consequences that redistribute wealth from creditors to debtors. the near - term effects of money creation often appear to be positive, while the undesirable consequences only become apparent over time. while money creation results in lower nominal interest rates and perhaps a modest boost to real activity in the short run, over time, it results in higher inflation and higher nominal interest rates and ultimately requires painful efforts to restore price stability. awareness of these long - term consequences of succumbing to the temptation of excessive money creation is the basic reason that over the last half of the 20th century, there has been a strong movement to establish and maintain independent central banks in country after country. it is simply good governance and wise economic policy to maintain a healthy separation between those responsible for tax and spending policy and those responsible for money creation. another widely acknowledged basic tenet of sound central banking is the wisdom of maintaining a low and stable inflation rate. price stability contributes to the economy ’ s growth and employment prospects in the longer term and helps to moderate the variability of output and employment in the short to medium term. price stability allows the economy to function in a more efficient and more productive manner by giving individuals and businesses more confidence that the purchasing power of their money will be maintained over time. central banks are uniquely positioned to achieve price stability. the economic costs of failing to do so can be quite high. despite the well - known benefits of maintaining price stability, there are increasing calls to abandon this commitment in both europe and the u. s. central banks are under increasing pressure to act, both because fiscal authorities have been unable to make credible commitments to maintain fiscal discipline and because central banks have been willing to engage in actions that stray into the realm of fiscal policy – for example, purchasing assets of the housing sector. this is a disturbing trend that risks undermining the independence of the central bank to control monetary policy and its ability to preserve a credible commitment to price stability. bis central bankers ’ speeches why monetary policy and fiscal policy should remain separate as i mentioned,

growth rate for this year. next year, growth is also expected to be broad - based, apart from an expected decline in the building and construction sector. the tourism industry is expected to lead the growth assisted by some growth in agriculture. let me now move to the performance and challenges of major sectors. i begin with sugar. sugar has traditionally been the backbone of fiji ’ s economy. apart from its direct benefits, the industry has also had significant benefits to the economy. however, the sugar industry has been plagued with on - going problems for a number of years which we were unable to solve decisively and now these problems are threatening the viability of the industry. the cane and sugar industry ’ s contribution to real gross domestic product ( gdp ) has fallen over the years. this industry now contributes only around 3. 0 percent to real gdp, a significant fall in contribution when compared to around 11 – 12 percent contribution 10 – 15 years ago. following a peak of around 500, 000 tonnes of sugar produced in 1994, production has steadily declined. last year, sugarcane output was the lowest since 1961. the total sugar output last season was 168, 000 tonnes. the significant fall in sugar output last year was due largely to the inefficiency of the sugar mills, which affected sugar production. the sugar industry today faces major challenges. these challenges have to be addressed urgently. areas of reforms needed in the sugar industry are : the fsc ’ s financial problems have to be quickly fixed. its cashflow situation is dire to say the least. factory problems must be fixed as soon as possible. the mill - upgrade programme under way for the last few years has not delivered to expectations and resulted in huge losses to the millers, farmers and the country as a whole. the fsc had to go into huge debt because of the mill upgrade programme. the substandard work done by the contractors resulted in huge losses last year. it was a disaster to say the least. however, the board and management of the fsc are now confident that this year ’ s crushing season should go well ; the industry needs to put in strategies to increase cane production to two or three times the current production in the next 24 months. for this they need land and financial support. they have to re - habilitate large number of cane farms which are producing well below industry norms due to neglect of farms and long ratooning rather than planting new cane every three to four years. productivity must be improved through farm