NEWS

A-G Schools Parliament On How Inflation Works

“Annual headline inflation has been increasing since the second half of 2021. It was three per cent in December of last year,” he said.
10 Feb 2022 10:29
A-G Schools Parliament On How Inflation Works
Acting Prime Minister and Attorney-General Aiyaz Sayed-Khaiyum. Photo: Parliament of Fiji

Consumers should expect an increase in the price of fruits and vegetables over the next few months given the recent flooding in Sigatoka, Ba and other places around Fiji.

Speaking about inflation in Parliament, Attorney-General and Minister for Economy Aiyaz Sayed-Khaiyum said wheat prices were likely to increase from yesterday.

“We import as I have said publicly, we make obviously flour from wheat, two companies in Fiji import wheat, FMF and Punjas & Sons. But flour is actually price control,” Mr Sayed-Khaiyum said.

“However, if the input cost is higher and it gets higher, we expect the prices to go higher. So, we price control, so if Punjas & Sons brings in the wheat, they grind it, they put something, other stuff in it and we get flour. We then price control it at wholesale. And then it gets sold to the retailers, it is again price control there too. But as I said if the wheat price at the moment is $298.22, and now it is going to go up in excess of $350 that obviously will be passed on to us. So, the price of bread, babakau, purini, cake, roti everything can actually go up. Those are the kind of things that we need to anticipate, and we are of course working behind the scenes to see how we can actually mitigate those costs, these inflated prices.”

 

Fiji not spared from rise in global inflation

Fiji, he said had not been spared from the rise in global inflation due to the high pent-up prices offshore, supply chain and freight cost issues because Fiji was heavily dependent on imports.

“Annual headline inflation has been increasing since the second half of 2021. It was three per cent in December of last year,” he said.

“Higher prices were noted mainly for food and fuel resulting from the surge in global commodity prices and continuous supply chain disruptions amid a rapid rise in pent-up demand in developed countries.

“In January, the inflation rate was 2.7 per cent led by higher prices for food and fuel as well as household furnishings and maintenance and health products.”

Estimates by the Reserve Bank of Fiji revealed that in 2021 imported inflation was the major factor in averaging at 4.4 per cent while domestic inflation was relatively muted at minus 1.1 per cent.

The higher imported inflation was mainly for food and fuel.

“Fuel prices went up and the honourable Prasad made a big noise about that some months back. Of course, he had not said anything because fuel price is coming down or has already come down by 10 percent since it went up. But we are projecting, if you look at the global trends, it will probably pick up again very soon.

“According to the IMF (International Monetary Fund), crude oil prices are forecasted to rise further by 11.9 per cent this year. Nonetheless, the sharp rise in oil prices and the supply chain disruptions are largely transitory and should start to ease from later this year. So, it will go up but expect it to come down further on, the economies will open up and there is some form of rationalisation.”

Mr Sayed-Khaiyum said the Government reduced duty on about 2000 items in last year’s budget.

“We of course made sure that we bring down a lot of the imported items that for example are used in the tourism sector and are used by the ordinary Fijians too. It would have been an actually a disaster if our dollar was devalued.”

 

Tourism industry

The A-G said Fiji lost $4 billion in tourism earnings during the pandemic.

However, there was no need to devalue the Fiji dollar because of buoyant foreign reserves which were well over the IMF benchmark of three months of import cover.

This would have put a lot of pressure on low income families.

“We are looking at the inflation rates kind of stabilising towards the latter part of this year as I have stated earlier on and if we had not reduced many of the items then we would have been in a different position. But that is one the reasons.”

 



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