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International Monetary Fund Committed To Help Fiji, Says Tao Zhang

The International Monetary Fund (IMF) is committed to help Fiji in a variety of ways including through technical assistance. This was confirmed by the IMF’s deputy managing director Tao Zhang,
07 Dec 2016 11:00
International Monetary Fund Committed To Help Fiji, Says Tao Zhang
International Monetary Fund Deputy Managing Director Tao Zhang

The International Monetary Fund (IMF) is committed to help Fiji in a variety of ways including through technical assistance.

This was confirmed by the IMF’s deputy managing director Tao Zhang, who is visiting Fiji for three days.

His visit started yesterday and will finish tomorrow.

This is one of the highest level of visit by an IMF official to Fiji and is a courtesy call to see the recovery efforts post TC Winston.

He will travel to Vanuatu to see the recovery efforts post Cyclone Pam thereafter.

Mr Zhang told the Fiji Sun: “This trip has been an excellent opportunity to see the progress that Fiji has made over the past decade.

“But I think we all realise that the current challenges are no easier than a decade ago and indeed are increasing with climate change problems becoming more acute.”

While in Fiji, Mr Zhang will meet with the Minister for Economy Aiyaz Sayed-Khaiyum and the Reserve Bank of Fiji governor Barry Whiteside.

In this meeting, they are expected to discuss the broad growth outlook and challenges to the macro economy post Tropical Cyclone Winston.

There may also be discussions on how the IMF can assist further.

 

 

Q and A with the visiting IMF’s deputy managing director Tao Zhang

 

What has the observation been by the IMF regarding the Fijian Economy? Please explain.

First of all, thank you for this interview. I recently joined the IMF as deputy managing director, and this is my first trip to the region in my new role, although I worked closely with many Pacific Island nations during my time at the Asian Development Bank.

For me, this trip has been an excellent opportunity to see the progress that Fiji has made over the past decade. But I think we all realise that the current challenges are no easier than a decade ago—and indeed are increasing with climate change problems becoming more acute.

It is becoming more urgent to evolve, adapt and build resilience.

Fiji’s economy was entering its third year of above four per cent growth when Cyclone Winston hit in February.

Because of the destruction and disruption of activity caused by the cyclone, we have lowered our growth forecast to 2.5 per cent in 2016 (previously 4.3 per cent).

The good news is that, the government responded quickly and admirably in getting the reconstruction effort going, which is helping a recovery.

For 2017, GDP growth is projected to accelerate to 3.9 per cent, as the adverse effects from the cyclone on activity wane and public and private sector investment boost demand.

The positive outlook is also underpinned by strong remittances and tourism.

We see the near-term policy mix as appropriate, given the need to support growth in the near term.

But looking further ahead, it will be important to rationalise current spending as a priority, including to create further room for much needed infrastructure spending.

 

What are the main risks affecting the outlook?

On the external front, a sharper slowdown in China and other trading partners such as Australia and New Zealand could impact Fiji’s tourism revenues, as well as remittances.

Domestically, slower execution of infrastructure projects (and reconstruction more broadly) could slow the recovery. We should also keep in mind the importance of maintaining momentum for reform.

Failure to do so could affect confidence and hurt investment, adversely impacting medium-term growth prospects.

 

How is the IMF willing to help Fiji?

We can help Fiji in a variety of ways through our technical assistance and our regular monitoring of the economy (known as IMF surveillance).

Through our technical assistance, we are helping the Fijian authorities to enhance the skill set and institutional capacity for effective economic and financial management. For example, we have been supporting the modernization of the revenue authority to help revenue predictability, broaden the revenue base, and improve tax collection.

We think this work is particularly important because revenues provide room for the essential spending on reconstruction, services and infrastructure development that is critical to strengthen resilience to natural disasters.

While channeling our cross-country experience and international best practices, we tailor policy advice to meet Fiji’s unique needs and challenges.

Our assessment also helps to provide confidence to aid donors, lenders and markets that a country’s policies are sustainable and helps to catalyze financial support when needed.

Our current policy assessment is that the policy mix is broadly appropriate to support growth.

We see Fiji as an important hub in the Pacific.

The IMF has maintained strong engagement with Fiji for more than two decades. Our regional office for technical assistance (Pacific Financial Technical Assistance Centre or PFTAC) has been in Suva since 1993, and in 2010 we opened our IMF regional representative (RR) office there to support our work in the Pacific.

The RR Office covers Fiji, Kiribati, Marshall Islands, Micronesia, Nauru, Palau, Papua New Guinea, Samoa, Solomon Islands, Tonga, Tuvalu, and Vanuatu, while PFTAC covers those 12 countries plus Timor Leste, Cook Islands, Niue, and Tokelau.

PFTAC is operated by the IMF with the financial support of the Asian Development Bank, Australia, New Zealand, Korea and the European Union.

 

What kind of assistance is the IMF willing to provide Fiji to fully recover from Winston?

The IMF remains prepared to assist Fiji in dealing with the aftermath and rebuilding the economy over the coming year. Should a country request it, the IMF can offer financial support quickly when needed.

Recently, we have made our financing facilities more accessible to small states, including in the face of natural disasters-through the rapid financing instrument and the rapid credit facility.

These provide financing (at low levels) on a one-off basis without the need to have a full-fledged programme in place.

Feedback:  farzana.nisha@fijisun.com.fj

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