worked very well and the economy has been driven largely by domestic demand in the last four years. simply put, people, government and corporations are spending more. this spending comes largely in two parts consumption and investment. both these are buoyant and are helping to move the economy along. consumption spending let me talk first about consumption spending. the buoyancy in consumer spending is clearly reflected in the growth in the wholesale and retail sector, buoyant vat receipts and strong pick up in credit. while consumption helps growth in the year that it is spent, its impact does not last beyond that. in fact, for an economy like fiji, consuming more also means more imports and over time this can lead to balance of payments problems if we cannot sell enough exports. after four years of high consumer spending, this is exactly what we are facing now. our imports are rising while sadly our exports are not keeping up. as i explained, sugar, gold, agriculture and garments are struggling. exports in the last three years have declined in absolute terms. we forecast exports to increase only by 3 percent in the next three years. meanwhile imports are rising by an average of 6 percent annually. the trade deficit is therefore widening. something will have to close the gap very soon. the solution is therefore obvious. we must sell more exports. a modest target of 10 percent growth in our domestic exports per year for the next five years should help. and we can easily meet this target if we accelerate the sugar reform, lift the productivity of our agricultural exports and grow the new industries. financing of consumption one may ask where is the funding of this strong consumer spending coming from. well, from four major sources. firstly, wages and salaries, secondly, credit or borrowing, thirdly, fiji national provident fund withdrawals and lastly from remittances. withdrawals from fnpf are running at around $ 16 million a month. remittances let me elaborate on the remittances. personal remittances have become a prominent source of foreign exchange for fiji. personal remittances have surged to $ 300 million in 2004, compared to a mere $ 50 million five years ago. remittances are now equivalent to 7 percent of gdp and that is more than many of our traditional economic sectors. they have also displaced garments and sugar on their rise to become the second largest source of foreign exchange earnings for fiji. furthermore, 4 / 8 we are only capturing remittances that

today, we envisage many benefits to both countries. trade relationships between papua new guinea and fiji will be strengthened. we will see increased competition for banking services and products. there will also be an opportunity for capacity building as fiji staff work in other bsp branches and vice versa. we at the reserve bank of fiji look forward to working closely with bank of south pacific limited to ensure that fiji ’ s financial system is dynamic and sound. i look forward to your contribution to the economy and the financial system. once again, i congratulate you on the official opening of bank of south pacific limited and wish you every success in your operations. thank you.