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“RBF Governor and FSC Board” (FT 2/12/2017)


RBF Governor and FSC Board

At the recent Annual General Meeting of the Fiji Sugar Corporation (FSC), the Leader of the Fiji Labour Party (Mahendra Chaudhry) legitimately questioned the appointment of the Reserve Bank of Fiji Governor (Ariff Ali) to the Board of FSC and Sugar Cane Growers’ Fund.

Chaudhry correctly commented that “The RBF has an oversight and supervisory role. It must not get itself directly involved in the affairs of corporate entities or financial organisations. It is just not ethical”.

But not only is the RBF a “supervisory” and “regulatory” body for all financial institutions in Fiji (including the Grower’s Fund), but it is also tasked with exchange rate policy that can help or harm the FSC and the Sugar Cane Growers on whose boards he is now sitting, as well as be a commentator on Government loan guarantee policies towards bodies like FSC.

Whose interests does the Governor serve on these other boards when there is a conflict of interest?

Why indeed does the RBF Governor accept an appointment by a Minister of the Government of the Day when such appointments make him personally vulnerable to many conflicts of interest?

The RBF Governor

Some fifteen years ago, I had pointed out (The Fiji Times, 12 March 2002 “Funny business for the Gov”) the many conflicts of interest that the Governor of the RBF then (Savenaca Narube) faced because of his Chairmanship of the FNPF and also of the board of the private telecommunications monopoly FINTEL . Similar issues are at play here.

The RBF is virtually the only autonomous and independent body that has some degree of “oversight” on government policy, not just of the usual ones of budget deficits, Public Debt and government guarantees, but also microeconomic policies such as the regulation of monopolies in the public interest.

The RBF may legitimately and ought to constructively criticize the Government of the Day if the latter was thought to be unwisely strengthening a private exploitative monopoly (as FINTEL was then arguably doing) or irresponsibly increasing public liability through government guarantees.

But then how can the RBF criticize a board of which the Governor himself is a member?

The current RBF Governor clearly faces a conflict of interest with FSC and the Cane Growers’ Fund which it is supposed to regulate.

Not too long ago, in contrast to commercial banks, the RBF lent a large sum of money to FSC which was to all intents and purposes financially insolvent, had it not been for government guarantees and subsidies.

Should either or both of these entities not perform as well as expected, Board Members can and must be held accountable by taxpayers who supposedly own majority shares in FSC, and the farmers who theoretically own the Cane Growers Fund.

What can the RBF Governor say then to possible criticism from the public that the Board Members (including himself) did not perform as well as they should have?

What can the RBF Governor say if these entities want to apply to RBF for more funding?

What can the Governor of the RBF say if these entities continue to apply to government for a continuation of government guarantees and subsidies (at taxpayers’ expense) perhaps beyond some optimal point (which may indeed have been reached long ago)?

What will be the Governor’s responsibility as a Board Member of the FSC and the Cane Growers’ Fund?

As Governor of the RBF, will he then be judging his own performance as a Board Member of the FSC and Cane Growers’ Fund?

There are even more “conflict of interest” head-aches for the RBF Governor relating to Fiji’s exchange rate.

RBF Governor and exchange rates

Export industries like the sugar industry (including the FSC) can be helped considerably if the Fiji dollar is devalued or depreciated thereby increasing the sugar industry’s earnings in Fiji dollars; conversely, the sugar industry can be harmed considerably if the Fiji dollar is revalued or appreciated thereby reducing the Fiji dollar value of their export earnings.

Whether it will materially help the industry or not, nevertheless, one of the policy options that the FSC Board and the Cane Growers Fund Board can clearly advocate is the devaluation or depreciation of the Fiji dollar to help FSC and cane growers.

But the Governor of the RBF is central to any decision to devalue or revalue the Fiji dollar.

What exactly will be his role as a member of the Board of FSC and Cane Growers’ Fund, should there be any discussion of policy on Fiji’s exchange rates?

The Governor may reply: “I excuse myself from these discussions”.

But I remind of the cliche from another field “justice must not only be done, but seen to be done”.

There should be no hint of suspicion that the Governor of the RBF may be influenced, however little, by his membership of another board, and vice versa.

The Governor has better things to do

The RBF has the sacred responsibility of safeguarding the role of Fiji’s money as means of payment and store of value, and have regulatory oversight of the many financial institutions that operate in Fiji – banks, insurance companies and other credit institutions, including hire purchase companies.

The RBF already faces numerous challenges which urgently need tackling, even if there is little hope of success because of the power of the corporate bodies in Fiji.

Why have savers been losing out for decades because the interest rates on their deposits are way less than the annual rate of inflation?

Why is it that Fiji’s savers, on whose savings the entire banking business is based, are the only ones losing money every year, while the bankers and borrowers laugh all the way to the bank?

Is there any scope for reducing the interest rate gap between lending rates and deposit rates, as previous Governor of the RBF (Sada Reddy) boldly set out to do?

Should there be better guidelines for the lending mix of banks and credit companies, for instance making sure that the rural sector not horribly deprived of credit, forcing them to avaricious money lenders even worse than banks?

Are the insurance premiums and compensation policies fair to the clients?

Is the RBF honest and hard-hitting in its assessment of the taxation, expenditure, and borrowing policies of the Government of the Day, or is it merely “talking up” Government’s economic performance in shady growth rates?

The list goes on.

So why does the RBF Governor waste his time sitting on public enterprise boards with possible conflicts of interest with his own primary role as Governor of the RBF?

Can he not request the Minister to find someone else, perhaps one of the Governor’s deputies or technical people?

Could he even dare to ask as a Governor of RBF should, “Sir, is it healthy for Fiji that a few people have multiple board memberships with inherent conflicts of interest?”

That requires another article.


The Governor would be all too aware that in a Fiji divided by ethnicity and religion, Ariff Ali’s appointment would be seen by many critics of Minister Khaiyum (all powerful in the Bainimarama Government) as yet another “Muslim” appointment, whether there is any truth in it or not.   This might have traction with a few given that there were other RBF technical staff who are more senior in experience than Ariff Ali. Nevertheless, regardless of how persons are appointed to high positions such as the Governor of the Reserve Bank of Fiji, once there, the appointee has a total responsibility to the post, and not to the Government Ministers who may have been influential in appointing him.  Rather than condemning such appointments, the public needs to give the appointees time to prove themselves worthy of the position.


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