PRICE shocks are coming for Fiji’s $3.5 billion foreign reserves with the Reserve Bank of Fiji (RBF) projecting downside risks, and foreign reserves pressures to possibly reach our shores earlier than expected.
As the Israeli-US war on Iran continues into its second month in the Middle East and an ensuing energy supply crisis spreads slowly across other regions of the world, including in the Pacific, RBF in its March economic review has warned that it is expecting the external sector conditions to be challenging over the near term.
“Higher global fuel prices are expected to raise input costs across transport, logistics, and electricity generation and other industrial sectors, reducing short-term value added even if output levels hold steady,” the RBF stated.
“Tourism is particularly exposed, as elevated aviation fuel costs will increase airfares and operating expenses, making travel less affordable for price-sensitive markets and creating added headwind to the visitor arrivals outlook for the year.
“Overall, while domestic indicators have been resilient in the first two months of 2026, the combination of global uncertainty, higher transport costs and sector wide cost pressures leaves Fiji’s growth outlook of 3.0 percent downward biased, with risks tilted toward softer activity over the coming months.”
As a central bank, RBF is mandated to manage twin monetary policy objectives of maintaining low inflation and healthy foreign reserves for Fiji, important for sustained economic stability.
Both are currently under pressure from the war in the Middle East.
“Rising global fuel prices and continued supply–chain disruptions are expected to filter through to domestic prices pushing inflation higher in the coming months,” the bank noted.
“With global fuel supply risks elevated, the current inflation outlook of 2.5 to 3.0 percent is now upward–biased.
“These conditions have heightened the importance of foreign reserves (FR), especially as higher oil prices and ongoing volatility in global shipping could weaken Fiji’s external position.
“For now, FR remains adequate at around $3.5 billion (31/03), equivalent to 5.0 months of retained imports and are projected to remain sufficient in the medium term.
“However, risks are tilted to the downside as continued volatility in global fuel markets and freight costs also raises the likelihood of reserves pressure emerging earlier than anticipated.”
RBF has again kept its Overnight Policy Rate at a low 0.25 percent to help maintain low inflation.
