The Reserve Bank of Fiji (RBF) has warned that pressure on the nation’s roughly $3.5 billion in foreign reserves may arrive sooner than previously expected as the ongoing Israeli–US war on Iran exacerbates global fuel and shipping volatility. In its March economic review, the central bank said heightened energy risks are already starting to filter through to Fiji’s external sector and could trim growth while nudging inflation higher.
RBF economists cautioned that higher global fuel prices will push up input costs across transport, logistics, electricity generation and other industrial sectors, “reducing short‑term value added even if output levels hold steady.” Tourism — Fiji’s largest foreign‑exchange earner — is singled out as particularly vulnerable: elevated aviation fuel pushes up airfares and operating costs, making travel less affordable for price‑sensitive markets and creating a headwind for visitor arrivals this year.
The bank said that, despite resilient domestic indicators in the first two months of 2026, the official growth forecast of 3.0 percent is now “downward biased,” with risks tilted toward softer activity in coming months. At the same time, rising fuel and freight costs are expected to feed into consumer prices, giving the inflation outlook an upward bias; the RBF placed its near‑term inflation projection in a 2.5–3.0 percent range.
For now, the RBF noted foreign reserves remain adequate at around $3.5 billion as of March 31 — roughly equivalent to five months of retained imports — and are projected to be sufficient over the medium term. However, the bank highlighted that continued volatility in global fuel markets and freight costs raises the likelihood that reserves pressure could emerge earlier than anticipated, narrowing the margin for policy manoeuvre should the external environment deteriorate further.
The update formalises and sharpens earlier regional concerns about disruptions to oil flows and higher fuel bills following strikes and military activity in the Strait of Hormuz and wider Middle East. Government agencies and regulators in the Pacific have already been warning of fuel‑price spillovers; the RBF’s review is the first clear signal from Fiji’s central bank that those international tensions are amplifying downside risks to reserves and macroeconomic stability.
In response to the current low‑inflation environment and the uncertain outlook, the RBF has left the Overnight Policy Rate unchanged at a historically low 0.25 percent. The central bank reiterated its twin mandate to maintain low inflation and healthy foreign reserves, while saying it will continue to monitor developments and the pass‑through of global energy and shipping costs to the domestic economy.
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