FIJI'S CURRENCY

New Zealand Herald, Volume LXX, Issue 21404, 31 January 1933, Page 11

FIJI'S CURRENCY

THE INCREASED EXCHANGE

AFFECTED BY NEW ZEALAND BUSINESS FIRM'S CONCERN [from our own correspondent] SUVA, Jan. 2G The announcement made by the local banks on Friday last that, following tho action taken in New Zealand, the rato of exchange Fiji on London had been increased to £125 (on a basis of £IOO London), caused considerable consternation among local businoss people. Previously tho rate was £lll on the basis of £IOO London. Fiji currency is considered to bo sound and very well secured, but tho action taken by tho Fiji Government in December last in linking their curtency system with that of New Zealand has had the effect of dragging Fiji in the wako of New Zealand's depreciated currency. It was rather unfortunate for tho colony that some enterprising official at Home discovered that according to the ordinance the commissioners of currency could issuo Fiji currency notes only "in exchange for current gold coins, or for silver coin in such cases as may be prescribed with tho approval of the Secretary of State," and that instead of strictly adhering to this regulation tho commissioners of currency were issuing notes in return for gold as to one-fifth of the amount issued and a sterling draft on London as to the remaining four-fifths. This was done for the simple reason that gold coin in sufficient quantities was not available. With insistence upon full payment in gold coin the banks operating in Fiji found themselves in the position of being unable to obtain sufficient bank notes to cash the big cheques issued by the Colonial Sugar Refining Company to the Indian cane growers. To avoid a banking impasse, with probable serious results, the Government hastily summoned a meeting of the Legislative Council on December 13, when it submitted a measure providing for the issue of currency notes in exchange for New Zealand currency or for banker's drafts on New Zealand, such currency notes to bo redeemable at any time in New Zealand currency. A Temporary Expedient In passing bill purely as a temporary expedient the elected members criticised it strongly and deprecated any suggestion that it should bo allowed to remain. The fear that New Zealand might depreciate its currency and similarly affect Fiji was pointed out by several speakers, who made it clear that they supported the measure merely in ordor to avert a serious banking crisis. Now that these fears have been realised the colonial executives are busily endeavouring to find another way of avoiding the new problem that has arisen. It has been pointed out that the same arguments that are used in other countries in support of a depreciated currency do not apply in Fiji, for the simple reason that the colony's largest industry is the production of sugar and that the profits from that industry are not brought back into the colony, but merely sufficient funds to pay the expenses of production. The industry is controlled by one company and the producers are for the most part wage earners, upon whom the only effect of tho increased exchange rate will be the resulting increased cost of living. Copra producers, and to a very much smaller extent, dairy farmers and those shipping bananas to Australia under the limited quota, are the only people to receive any initial advantage. Suggested Sterling Basis It is reported that in its effort to avoid a continuation of the new exchange rato the Government will, as an alternative, seek to havo the Fiji currency placed upon a sterling basis. Although this would deprive the producers of the advantage of the £ll in every £IOO which they formerly enjoyed under the system in force prior to the December legislation, it is felt in many quarters that this would be preferable to the disadvantage that now exists. Fiji depends upon importations from the , United Kingdom for many of the necessities of life and production. In interest charges and sinking fund contributions alone the sum of £65,000 will have to bo remitted to London this year, and in numerous ways the colony will be heavily hit by the new rate. The Fiji currency is very soundly secured by gold and silver deposits at the Treasury in Suva and by gilt-edged securities in England, estimated on a very conservative basis to be 25 per cent in excess of the required 20s. An emergency meeting of the Executive Council was held on the morning following the announcement and it is undorstood that its views on the question have been cabled to the Colonial Office.

The Fiji rate on both Australia and New Zealand is now the same, viz., 1 per cent. The Australian rate was previously 11 per cent, which fact encouraged local merchants to buy largely from the Commonwealth. As the position stands at present. New Zealand gains an advantage in the fact that exchange conditions are now equal.