Suva: Fiji has asked the International Monetary Fund (IMF) for a yet-to-be agreed upon loan to support its balance of payments to minimise risks identified in a recent IMF report.
A government statement said that while foreign reserves are at “comfortable levels” at $1.1 billion equivalent to 3.1 months of import cover, there are possible downside risks such as the current rise in fuel prices and vulnerability to natural disasters.
“In recognising the need to minimise balance of payment risk, government will put in place the necessary fiscal and monetary policy mix and seek support if needed,” the statement said.
“Taking into account the downside risks for the balance of payment, government expressed interest for possible balance of payment support from the IMF through a request made in February 2010. As a member, Fiji is entitled to seek support from the IMF which is available through an SBA (Stand-By Arrangement).”
A fact-sheet on IMF lending said the bulk of the IMF’s assistance to middle-income countries is provided through SBAs, designed to help countries address short-term balance of payments problems.
“Program targets are designed to address these problems and Fund disbursements are made conditional on achieving these targets.”
“The length of a SBA is typically 12–24 months, and repayment is due within 3¼-5 years of disbursement. SBAs may be provided on a precautionary basis—where countries choose not to draw upon approved amounts but retain the option to do so if conditions deteriorate—both within the normal access limits and in cases of exceptional access.”
The government statement said the first round of negotiations on a possible SBA had been completed without any agreement reached.
“The negotiations were focused on the preconditions and timeframes for structural reforms. An IMF team is due to visit the country in July to undertake further negotiations,” it said.
The statement said it is very early to confirm an SBA will be agreed to since negotiations remain to be completed.
“This will take some time given that a thorough assessment will be undertaken on all preconditions and timeframes. As negotiations proceed, further information will be made available.”
The statement said it is too early to confirm the amount that will be required since the consultation and negotiations are ongoing.