Fiji may have to tighten monetary policy

A TIGHTENING of mone tary policy may be

required in Fiji this

year, with inflation run ning at 10 per cent at the end of 1998, according to the Asian Development Bank.

Its 1999 Outlook says that in the short term the government faced two major tasks - one of which was to ensure that the stimu lus to the traded goods sector from the cur rency devaluation was not further eroded by wage and price rises.

The Bank says that the second task was to reverse the deterioration of the country’s fiscal position that occurred in 1996-1998.

ADB says that if Fiji is to achieve eco nomic growth at a reasonable and sustain able rate, restoring investor confidence was essential. “This, in turn, requires political stability and a government that delivers a coherent, credible, and predictable policy framework,” it says.

It says that if Fijian landowners do not renew Indo-Fijian farmers’ expiring land leases, the sugar industry will effectively be undermined during 1999-2001.

“This will occur precisely at the time when the sugar industry must face the prospect of losing its preferential access to

European markets,” ADB says.

Other issues to be addressed to restore investor confidence include clear and enforceable property rights as a basic neces sity to encourage foreign investment in the tourism sector.

Burdensome regulations and restrictions on the repatriation of profits also discour aged investment, ADB says.

Despite this, Fiji’s Gross Domestic Product is forecast to grow by 2.7 per cent in 1999. “This prediction of an economic recovery is based on the assumptions of a five per cent increase in visitor arrivals, a five per cent expansion in the construction sector from hotel investments and public infrastructure projects, a 10 per cent growth in garment production, and a 25 per cent growth in mining output,” ADB says.

“The economy was in recession for the second year in succession in 1998, with out put falling by nearly four per. cent, largely because of the effects of a drought on sugar

production and reduced gold production.

Growth will resume in 1999, provided that tourism picks up and investment increases.

A coherent, credible, and predictable eco nomic policy framework is needed, particu larly with respect to sugar land leases,”

ADB says. ■