Business

A-G Applauds International Credit Rating Boost

The Attorney-General and Minister for Economy Aiyaz Sayed-Khaiyum has applauded the Standard and Poors (S&P) Global Ratings for raising Fiji’s long-term local-and foreign-currency sovereign credit ratings to ‘BB-’ from ‘B+’.
28 Aug 2019 11:49
A-G Applauds International Credit Rating Boost
Peniasi Qalubau.

The Attorney-General and Minister for Economy Aiyaz Sayed-Khaiyum has applauded the Standard and Poors (S&P) Global Ratings for raising Fiji’s long-term local-and foreign-currency sovereign credit ratings to ‘BB-’ from ‘B+’.

Mr Sayed-Khaiyum made this announcement at the launch of the Merchant Finance logo at Suva’s Grand Pacific Hotel last night.

According to the S&P Global Ratings report that was published in the Fiji Sun on Monday, the outlook on the long-term ratings is stable.

The S&P report said: “At the same time, we affirmed our short-term sovereign credit ratings at ‘B’. We also revised our transfer and convertibility (T&C) assessment to ‘BB-’ from ‘B+’.”

Mr Sayed-Khaiyum also highlighted that Fiji has a robust financial system. As key stakeholders, he said we need to also understand that the financial institutions actually manage it in a prudent and transparent manner, and that’s what gives confidence.

Mr Sayed-Khaiyum said S&P gave these ratings because of the fiscal consolidation in the 2019-2020 National Budget and consistency in policy.

Mr Sayed-Khaiyum said a few months back there was a bit of panic in the market with interest rates going up, but that has all stabilised now.

He highlighted that the liquidity rate is in excess of $600 million nearly double to was it was at the end of last year.

Inflation sits at 0.7 per cent while foreign reserves at $2.2 billion. He noted that Fiji was in a good space from that perspective.

The S&P report said: “The stable outlook reflects our expectation that Fiji’s economy will continue to grow during the next 12 months, and that the government’s medium-term fiscal consolidation plan will result in a stabilising debt burden.

“We also expect the country’s external position and foreign-exchange reserves to remain sound.

“We could raise our ratings within the next 12 months if Fiji’s institutional settings continue to improve, which would help to support policy stability and economic growth.

“We might also raise the ratings if the Government loosens its foreign-exchange restrictions while maintaining a healthy level of reserves or if fiscal consolidation progresses faster than we currently expect, resulting in a declining debt burden.

Rationale

“We have greater confidence in policy continuity in Fiji following the elections of November 2018. The Fijian economy is entering its 10th consecutive year of growth, despite the severe damage inflicted by Tropical Cyclone Winston in 2016.

“While the government had sought to influence monetary policy in the past, we believe the Reserve Bank of Fiji has generally demonstrated improving operational independence during the past decade. We expect net Government debt to be roughly stable as the government begins to consolidate its fiscal position.

“Our ratings on Fiji remain constrained by its middle-income economy, with per capita Gross Domestic Product (GDP) of around US$6,000, a polarised political landscape, and limited monetary policy flexibility. These weaknesses are partly mitigated by the Government’s stable interest expenses, which should fall further as it accesses more low-interest lending, as well as its sound external position,” the S&P report said.

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