The Government owes its own registrar of Government debt over $600million.
The Reserve Bank of Fiji (RBF), according to the Government’s annual debt report 2022-2023, held a total of $694.3million in Government bonds at the end of July 2023, a huge jump from the $59.4m it held in July 2019.
This, according to economists, is due to something called quantitative easing, or when the central bank prints new money to be pumped into the economy.
“That has happened, particularly during the COVID years,” said former Reserve Bank of Fiji governor Savenaca Narube.
“Because of the impact of COVID on other institutions that purchase these bonds from Government, RBF went in and bought the bonds.
“It’s part of quantitative easing, the Reserve Bank pumps new money into the economy by doing this (buying bonds). I suggested that measure during COVID, I said put out more money into the system.”
Mr Narube’s proposal at the height of COVID in 2020 for RBF to print $500m in new money, lend it to Government who should then offer it to micro, small and medium enterprises, low income earners and families that lost their jobs was rebuffed by the then minister of Finance Aiyaz Sayed-Khaiyum, who said RBF will do no such thing as it would lead to huge inflation.
However, by July 2020 according to the debt report, RBF had significantly increased its bond holding to $360.1m from $59.4m in 2019. By July 2022, it had increased this further to $694.8m.
This, according to Mr Narube showed that new money was being pumped into the financial system by RBF, the only institution in the country that could do that.
He said this intervention by the central bank should not happen during normal times as financial markets have returned to normal.
“I agreed to that during COVID but now in normal times, that should ease off and the marketplace takes over the funding of Government. So I expect that to decline over time,” Mr Narube said.
RBF is the Government of Fiji’s registrar of debt and issues debt instruments on behalf of the Fiji Government, Mr Narube said.