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PORT VILA, Vanuatu (May 17, 1998 - PACNEWS/Ioane)---The Reserve Bank of Vanuatu has increased its lending rate to commercial banks and the government by five percent.

Reserve Bank Governor Andrew Kausiama says the move signals the government's firm intention to defend the currency parity of the vatu, The Vanuatu Trading Post reports.

Kausiama says the higher interest rates will increase the relative attractiveness of holding the vatu.

He says the bank also will increase the costs of overdrafts and other lines of credit, which some traders may be using as an alternative to repatriating foreign exchange receipts derived from exports.

The Finance Minister, Sela Molisa, responded to the news, saying that government would not change the value of the vatu.

His comments again seek to dispel rumors that the vatu may be devalued.

Molisa says an International Monetary Fund mission has just completed its regular assessment of the Vanuatu economy and concluded that it had no evidence to suggest that a devaluation of the vatu was necessary.

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