Regions and Countries

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p. 37 of 47 BACK | NEXT Developing Asia and the Pacific The global economy Newly industrialized economies Central Asian republics, Azerbaijan and Mongolia People’s Republic of China Southeast Asia South Asia The Pacific Cook Islands Fiji Islands Kiribati Marshall Islands Federated States of Micronesia Nauru Papua New Guinea Samoa Solomon Islands Tonga Tuvalu Vanuatu

Fiji Islands

Economic performance

The economy of the Fiji Islands contracted by 9.3 percent in 2000, reflecting the impact of unexpected political developments in May and the associated widespread civil unrest that followed. Manufacturing, construction, and tourism were the worst affected. Because of weak demand, inflation was low at 1.1 percent in 2000. Exports and imports declined sharply, but the current account realized a modest surplus. The capital account deficit also narrowed slightly, largely as a result of capital controls. The balance of payments showed a small deficit. Foreign exchange reserves covered around six months of imports.

Domestic policies: In response to an expected decline in government revenue of around 15.0 percent in 2000, the new Government implemented a mini-budget in July 2000 with expenditure being 10.0 percent lower than originally budgeted. The revised deficit target was equivalent to 3.5 percent of GDP. Despite these efforts, total government debt was 42.9 percent of GDP in 2000. The Reserve Bank of Fiji acted swiftly, following the developments of May 2000, to protect foreign exchange reserves and the exchange rate. A credit ceiling was imposed on commercial banks, interest rates were increased, and selective exchange controls were imposed. Following some improvements in the fiscal and balance-of-payments positions, a gradual relaxation of monetary policy was initiated in September 2000. Other key issues in the Fiji Islands include uncertainties in the garment and sugar industry, poor productivity in the sugar industry, and low private sector investment.

ADB operations

Operational strategy: ADB is closely monitoring the situation in the Fiji Islands. The medium-term focus is to stimulate economic growth by encouraging private sector development and export-oriented activities that support job creation. This will involve enhancing public sector reforms, supporting the establishment and functioning of an efficient financial sector and capital market, promoting corporatization and commercialization of public sector enterprises, selecting public sector investments for infrastructure development and poverty reduction, and addressing environment and natural resource management concerns.

Policy dialogue: Policy dialogue with the interim Government focused mainly on good governance, enterprise policy reforms, cost recovery, and operation and maintenance in the road subsector.

Loans and technical assistance: No loans were approved in 2000. Before the political events unfolded in May, ADB approved four advisory technical assistance grants totaling $590,000 for preparing a medium-term development plan, managing national debt, reviewing Fiji Development Bank’s operations, and mapping land boundaries to harmonize resource use.

Project implementation: Since joining ADB in 1970, the Fiji Islands has received 13 loans, of which 1 was active at the end of 2000. Contract awards totaled $1.2 million, bringing the cumulative figure to $116.3 million. The contract award ratio was 3.5 percent, lower than the ADB-wide average of 21 percent. Disbursements during the year totaled $4.6 million, bringing cumulative disbursements to $119.2 million. The disbursement ratio was 12.0 percent, lower than the ADB-wide average of 20.5 percent.

Nearly all ADB activities in the Fiji Islands were on hold in 2000. Because of a prolonged wet season, the Third Road Upgrading Project, the only ongoing project, was progressing slowly but generally satisfactorily. The Fiji Islands complied with the submission of audited project accounts and financial statements, and environmental covenants were being implemented.

   

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