Fiji Loses $36 Million From Overseas Loans

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Ministry failed to hedge against foreign exchange fluctuations

By Nasik Swami

SUVA, Fiji (Fiji Times, Nov. 6, 2014) – The Fiji Finance Ministry incurred substantial amount of foreign exchange losses totalling tens of millions of dollars last year.

The Auditor-General's report for 2013 reported a loss of $70,711,949.77 [US$ 36,273,000] in its review of the country's overseas loans.

In the report, the audit of the ministry noted that these foreign exchange losses were incurred because of fluctuations in exchange rates.

The audit further stated that discussions revealed the losses were a result of changes in foreign currency exchange rates.

"Exchange rate variations over time are a potential source of risk to cross-border financial obligations," the report said.

The Auditor-General's report said the findings indicated ministry officials failed to discuss the hedging exposures with the overseas lenders to avoid foreign exchange losses.

Auditor General Tevita Bolanavanua recommended the ministry to ensure that foreign exchange losses are kept at a minimal level while borrowing overseas.

In response, the ministry's management commented that the unit was assessing a number of foreign risk mitigation measures including hedging.

"It already has had discussions with a number of financial institutions. Some financial institutions are working on their hedge offer. MOF would be in a position to comment on the offer once all the analysis is completed," the management comments stated.

The Auditor General's 2013 report also revealed that its review of the ministry's debt portfolios noted that the ministry did not utilise the amount set aside for repayment of various loan accounts totalling $3,255,000 and $1,169,506 for the year ended 2012 and 2013 respectively.

The report stated that the discussions with the debt unit revealed that it was likely that repayment will commence from 2015 since the Government of China has extended the loan.

"Providing unrealistic budget submissions indicates poor planning by Debt Unit and hence provides an unnecessary burden to manage the debt. This will further lead to increase in Government borrowings," the report said.

The Auditor General recommended the ministry to make realistic budget estimates as it could lead to budget deficits and increase in borrowings.

In response, the ministry's management commented that a review was undertaken on this issue and more care and verifications were now being undertaken to ensure that budget estimates are accurate and more precise for further budget estimates.

Public Accounts Committee chairman Professor Biman Prasad in an interview yesterday said losses and unpaid loans were an important issue which the committee will look into when it starts its meetings.

"I am glad that the Auditor General has highlighted this matter," Prof Prasad said.

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