the major source markets for our imports of food, beverages and manufactured goods. the strong appreciation of the australian and new zealand dollar over the year has exacerbated the impact of already higher import prices feeding through to domestic inflation. these explain the large difference in the inflation rate in fiji by mid 2011 even after accounting for the vat and electricity price increases. on vanuatu, we find their low inflation rate presented this morning very intriguing and we will talk to our counterpart about their experience. 3. domestic economic performance a. the presentation by the imf regional resident representative – dr. yongzheng clearly highlights the performance of pacific island countries particularly fiji since the global downturn in 2008 coupled with the renewed risks and policy challenges given current developments especially in the advanced economies. b. we also agree that fiji economy had a weaker recovery in 2010 from the contraction in 2009. while tourism and manufacturing picked up, in 2010, the sugar industry declined. however, other exports did pick up significantly in 2010 due to a rebound in global demand and also improvement in terms of trade for certain resource commodities such as gold, forestry and fish products. c. we need to note that the significant migration of skilled labour force has affected fiji ’ s growth potential, which may explain why the recovery in the fiji economy – despite its advantages – to some extent has been slower that most pics. bis central bankers ’ speeches d. the paper also raised some valuable points for fiji and the government has already taken steps to implement some of these. the establishment of the land bank is to encourage landowners to deposit land so that it can be leased out under long term tenure for commercial purpose use. the response from the land owners has been encouraging so far with the area of land deposited in the land bank surpassing the 2011 target in june. sugar reforms are also underway with the government taking the lead role in addition to allocating around $ 122 million in the 2011 budget to support the sugar industry directly. apart from the sugar industry, there is an urgent need to fast track other public sector reforms to ensure long - term macroeconomic stability. e. the good news is that a stronger rebound in our domestic economy is envisaged for this year with growth expected across most sectors except for the construction sector. the current performance of most sectors to date have been mixed, with positive performances reflected in the tourism and related industries although other sectors remained weak. the economy is expected to grow by 2. 7 percent in 2011, however, this figure is currently under

. given this scenario, our monetary policy stance remains accommodative. i am glad to say that the financial system continues to be sound. developments in this all important sector have been clearly evident in the growth in total assets of our financial institutions. the key prudential indicators of our banking system remain favorable. the satisfactory performance of the banking system has been characterised by : • strong levels of capital ; bis central bankers ’ speeches • adequate liquidity ; indeed liquidity levels have been at all time highs in recent years ; • higher profitability ; and • revived lending trends which in the recent past were assessed to be on slow growth. there is also in my view a rapid development of innovation in the domestic financial sector. we are seeing a faster transfer of technology from abroad to fiji in the areas of microfinance, mobile banking, microinsurance, and bancassurance. lici fiji provides a classic example on bancassurance through its joint initiative taken with anz to roll out its insurance services using the bank ’ s network. performance of the insurance industry we all understand the critical role played by the insurance sector in ensuring our risks are covered. to any economy, insurance provides the safety net against possible risks that could cost the country millions of dollars. insurance, therefore, assists in the building block of a country by providing financial security in the event of a financial loss. on a more personal basis, it provides comfort and relief to businesses, individuals and families from hardship. our local insurance companies have generally performed well in terms of asset growth, profitability, adequacy of capital and solvency. let me mention a few statistics from our latest quarterly assessment : • total assets of the life insurance industry recorded a growth of around 8 percent over the year, to reach $ 780 million ; • net profit grew over the second quarter of this year to reach $ 25 million ; • net premium income grew by 25 percent over the year to june 2012 ; and • there has been a remarkable increase in the aggregate solvency surplus of assets over the required solvency margin for the insurance industry with the two life companies making up 50 percent of the overall solvency surplus. lici fiji lici fiji is one of the two companies licensed to conduct life insurance business in fiji. we have witnessed the continued expansion of lici ’ s operations in fiji, over the years, especially in the last five years with increased capital and solvency surplus, expanded market share in terms of premiums