current economic background – the rbf remains committed to its twin objectives – that is to maintain low inflation and an adequate level of foreign reserves. inflation has been high at the moment and reached 10. 4 percent last bis central bankers ’ speeches month. as we all know, the inflation outcome has been influenced by external and policy related factors – most of which are beyond the control of monetary policy. imported inflation alone accounts for more than 60 percent of our domestic inflation outcome. with the current demand side inflationary pressures weak at the moment, it is more appropriate that monetary policy remain accommodative to support some growth in the economy while at the same time vigilant on the potential second - round impact on inflation. inflation is forecast to subside to 7 percent by the end of this year and further to 4. 5 percent by the end of next year. b. on to core inflation – in principle monetary policy should only respond to persistent price movements. the reserve bank has two core inflation measures which are the trimmed mean and excluding food and energy items inflation, both are widely accepted and used in many central banks to exclude temporary price pressures. universally, it is hard to determine when that “ temporary ” impact will come to an end as there are a lot of factors that come into play at almost the same time. in fiji, the big increase in food inflation from june 2010 to june 2011 to 11. 3 percent was attributed to many factors. if we compare food inflation from june 2010 to december 2010, food prices only rose by around 2. 0 percent which can be regarded as quite stable. as such most of the increase in food inflation only came about this year on account of the vat rate change and the high food prices noted across the world during this period. by january 2012, we should see the impact of vat fall from the core inflation measure. as to the impact of high world food prices, as soon as prices of these food commodities normalise abroad, core inflation should return to normal levels. c. it was mentioned that fiji had high rates of inflation by the middle of this year even after accounting for the impact of higher electricity tariffs and the increase in vat which came into effect in november last year and january this year respectively. it was also mentioned that seychelles which despite having a larger devaluation managed to bring down inflation to the same rate as vanuatu. it is important to note that unlike seychelles, fiji ’ s major trading partners are australia and new zealand which are

and a development bank. conclusion with the current challenges in our economic environment both globally and domestically, the reserve bank has been proactive in its roles to support our economic recovery. we have eased our monetary policy stance and more recently we have been conducting moral suasion with the commercial banks in an effort to stimulate investment and credit especially to the priority sectors and support growth in domestic demand. we have and will continue to relax exchange controls in order to support overseas current payments which are conducive for business growth. this will also instil confidence to the investors and encourage investment as well. the reserve bank has rationalised and introduced the import substitution and export finance facility which all exporters and businesses may access to boost exports and reduce imports. energy renewable projects also qualify for this facility. $ 40 million is available under this scheme and the current usage is $ 20 million. the rbf lends funds to commercial banks, credit institutions and fdb at 2 percent and these lending institutions are allowed to charge interest rates up to a maximum of 6 percent. the current government ’ s concerted effort is vital and timely and we also support the call made by this panel for more variants on fiscal and incomes policies given the limitations faced by the monetary authorities. nevertheless, a more positive outlook remains ahead with the reforms taking place and as the current mix of monetary and fiscal policies are aligned. from the presentations that we have heard so far, investment is the key. we need to address all the obstacles to investment and address them accordingly. we need to ensure that the environment is conducive as well. it is also important that fiji attracts the right type of investors. we have heard a lot of issues and questions so far. what we need is solutions – practicable and relevant solutions that can be implemented. finally, i would like to add that this type of dialogue is healthy and provides an excellent platform for exchange of ideas so that we can all work together and move forward for a better fiji. thank you. bis central bankers ’ speeches