The Government owes more than $600 million to its own debt registrar, the Reserve Bank of Fiji (RBF). According to the Government’s annual debt report for 2022-2023, the RBF held $694.3 million in Government bonds as of the end of July 2023, a significant increase from the $59.4 million it held in July 2019.
Economists attribute this surge to the practice of quantitative easing, wherein the central bank prints new money to inject into the economy. Former Reserve Bank of Fiji governor Savenaca Narube explained that this practice was especially prominent during the COVID-19 pandemic. “Due to the impact of COVID on other institutions that purchase these bonds, the RBF stepped in and bought the bonds as part of quantitative easing,” Narube stated. “During COVID, I suggested that the RBF should pump more money into the system.”
Narube’s 2020 proposal for the RBF to print $500 million in new money, which would be loaned to the Government and then distributed to micro, small, and medium enterprises, as well as low-income earners and families who lost their jobs, was rejected by the then Minister of Finance, Aiyaz Sayed-Khaiyum. He argued that such a move would lead to significant inflation. However, by July 2020, the RBF’s bond holdings had already risen to $360.1 million from $59.4 million in 2019, and by July 2022, this figure had further increased to $694.8 million.
According to Narube, this increase in bond holdings demonstrated that the RBF had been injecting new money into the financial system, a capability unique to the central bank. He noted that such interventions by the central bank should not occur during normal times, as financial markets have returned to normal. “I supported this measure during COVID, but now in normal times, it should be phased out, and the marketplace should take over government funding. So, I expect this to decline over time,” Narube stated.
He emphasized that the RBF serves as the Government of Fiji’s registrar of debt and issues debt instruments on its behalf.