Political sketch
Independent from the United Kingdom on 10 October 1970.
Fiji was settled by Austronesian-speaking peoples in the late second millennium B.C. The Dutch navigator Abel Tasman explored the islands of Vanua Levu and Taveuni in 1643; British and U.S. explorers followed in later centuries. Traders and the first missionaries arrived in 1835. In 1854 one of the most influential native chiefs, Cakobau, became a Christian. He subsequently became the king of western Fiji. In 1874 he agreed for Fiji to become a British colony. The British annexed the island of Rotuma to Fiji in 1881. In the 1880s large-scale cultivation of sugarcane began. Many Indians immigrated to work in the sugarcane fields.
On 10 October 1970 Fiji became independent from the United Kingdom. Independence made more apparent the tensions between Indians and Pacific islanders. After Indian-dominated political parties won the parliamentary election of April 1987, Fiji's armed forces staged two coups and converted Fiji into a republic to ensure the political dominance of Pacific islanders. The Commonwealth of Nations expelled Fiji until 1997. From 19 May-13 July 2000 a disgruntled businessman took members of the government hostage and attempted to install himself in power. Today (2005) he is imprisoned for life. Fiji's economy is based on agriculture (especially sugar cane), tourism, and light industries.
Wars since 1500
None.
Convertibility
The sterling area:
On 2 August 1914, soon after the First World War began, the United Kingdom issued a proclamation imposing a one-month moratorium of payment for bills of exchange accepted before 4 August; an act of 3 August 1914 gave legislative sanction to the proclamation. The moratorium was subsequently extended for a month and ended on 4 November 1914. Legally the pound sterling remained convertible into gold and could be exported, but the risk to shipping from German submarines made the cost of shipment prohibitive, so the United Kingdom was in effect off the gold standard. The British government refused to include private shipments of gold in its war-risk insurance scheme. After the war, the export of gold was prohibited from 1 April 1919 under regulations that were given statutory form in 1920. On 28 April 1925 the government announced that the act would not be renewed when it expired on 31 December 1925. On 13 May 1925 the United Kingdom resumed the gold standard.
The United Kingdom abandoned the gold standard on 21 September 1931. The currencies of British colonies were almost all linked to the pound sterling through currency boards; being on a sterling-exchange standard rather than a gold-exchange standard, they followed the pound sterling off gold. Over the next few years, some former British colonies (Australia, New Zealand, South Africa) and other countries that had important trade links with the United Kingdom switched from gold to the pound sterling as their official or actual anchor. The result was termed the sterling area. The United Kingdom imposed exchange controls on 4 September 1939, the day after entering the Second World War. Most countries that were not current or former British colonies soon left the sterling area. Among the remaining countries, both current- and capital-account transactions were free of restrictions within the sterling area, but were restricted in dealings with outside countries. After the Second World War, the United Kingdom returned to the gold standard under the Bretton Woods system. It removed exchange controls on 15 August 1947, but reimposed them on 20 August 1947 after suffering a large loss of foreign reserves. Sterling had a dual exchange rate from 1961 until the United Kingdom abolished exchange controls. The sterling area remained in existence because sterling was not fully convertible. It began to crumble after the United Kingdom again abandoned the gold standard on 23 June 1972. By January 1973 the sterling area had shrunk to the British Isles and a few small British colonies; even Hong Kong had abandoned sterling as its anchor currency. The United Kingdom abolished exchange controls on 24 October 1979, ending the sterling area.
Fiji alone:
Fiji banned the export of gold in August? 1914, after the First World War began in Europe. Ordinance No. 1 of 1922 allowed the government to suspend the convertibility of currency board notes into gold from time to time or to pay the notes in silver (such as British silver coins), which however by this or a later ordinance was only exportable with a government license. Fiji left the sterling area on 23 June 1972, and extended exchange controls to the sterling area on 29 June 1972.
Other
Defaults on or restructurings of debt to the private sector (mainly from Purcell and Kaufman 1993 and Standard & Poor's 2004): None.
Banking crises (data since 1970s mainly from Caprio and Klingebiel 1999 and Frydl 1999): 1995 (the government rescued the National Bank of Fiji, which it owned).
Frankel and Rose (1996) list of currency crashes: None.
No exchange rate data in Reinhart and Rogoff (2003).
References
Primary sources:
--Laws and decrees:
Fiji. Gazette. 1897-present. Fiji Gazette (1872-1874); Fiji Royal Gazette (1875-1987); Fiji Republic Gazette (1987-1998); Fiji Islands Government Gazette (1998-2000); Fiji Government Gazette (2000-present). Suva: Government Printer.
Great Britain (United Kingdom). Gazette. 1665-present. Oxford Gazette (1996-1666); London Gazette (1666-present). Oxford (1665-1666); London (1666-present): His/Her Majesty's Stationery Office from 1903. Online at <http://www.gazettes.online.co.uk>; as of September 2005, gazettes since 1900 are available.
--Publications of monetary authorities:
Central Monetary Authority of Fiji. Annual report. 1973/1974-1983. Report and Financial Statements. (From 1976 onward, the last word of the title was the singular "Statement" rather than the plural "Statements.") Suva: Central Monetary Authority of Fiji.
Reserve Bank of Fiji. Annual report. 1984-present. Report and Financial Statement (1984-1985); Operations and Annual Accounts for Fiscal Year...(1986-1986); Annual Report (1988-present.) Suva: Reserve Bank of Fiji.
Reserve Bank of Fiji. Bulletin. 1976-present. Quarterly Review. Suva: Reserve Bank of Fiji.
--Web site of the current monetary authority (viewed January 2005):
<http://www.reservebank.gov.fj>
--Other publications or Web sites:
Great Britain (United Kingdom). Report on Fiji. 1920-1938, 1947-1970. Colonial Office, Report for … (1920-1930); Colonial Office, Annual Report on the Social and Economic Progress of the People of Fiji (1931-1938); Colonial Office, Annual Report on Fiji for the Year … (1947-1965), Commonwealth Office, Annual Report on Fiji for the Year … (1966-1967); Foreign and Commonwealth Office, Annual Report on Fiji for the Year … (1968-1970). London: His / Her Majesty's Stationery Office. (This series was called Colonial Reports until the Second World War and Colonial Annual Reports afterwards; it was suspended during the war for most colonies.)
Main secondary sources:
Chalmers, [Sir] Robert. 1893. A History of Currency in the British Colonies. London: Eyre and Spottiswoode for Her Majesty's Stationery Office.
Grynberg, Roman, Doug Munro, and Michael White. 2002. Crisis: The Collapse of the National Bank of Fiji. Suva: University of the South Pacific Book Centre.
IMF ARER. 1950-present. International Monetary Fund. Annual Report on Exchange Restrictions (1950-1978), Annual Report on Exchange Arrangements and Exchange Restrictions (1979-1988), Exchange Arrangements and Exchange Restrictions: Annual Report (1989-present). Washington: International Monetary Fund. (Contains information on IMF member countries and some of their dependencies.)
Knapman, Bruce. 1987. Fiji's Economic History, 1874-1939: Studies of Capitalist Colonial Development. Australian National University, Centre for Development Studies, Pacific Research Monograph No. 15. Canberra: Australian National University.
Luckett, Dudley G. 1987. Monetary Policy in Fiji. Suva, Fiji: Institute of Pacific Studies of the University of the South Pacific. (Covers recent history only rather than a long span.)
Narsey, Wadan Lal. 1988. "A Reinterpretation of the History and Theory of Colonial Currency Systems." Unpublished Ph.D. thesis, University of Sussex, England. From University Microfilms.
Reserve Bank of Fiji. 1987. "Reserve Bank of Fiji." <http://www.reservebank.gov.fj/docs/Reserve-Book.pdf>, viewed 16 March 2005. (A commemoration of the central bank's tenth anniversary.)
Rogers, K[erry] A., and Carol Cantrell. 1989. Paper Money of Fiji I: A Catalog of Paper Money and Related Items in the Repositiories of the Fiji Museum and National Archives of Fiji with a Note on Items on Display at the Bank of New Zealand. Dallas: International Bank Note Society Press. (I have not seen this book in many years; it contains the charter of the Fiji Banking and Commercial Company, 1873, and prospectus of Bank of Fiji, 1873.)
Shafer, Neil, and Colin R. Bruce II. 2000. Standard Catalog of World Paper Money, Volume 2: General Issues, 9th edition. Iola, Wisconsin: Krause Publications.
Monetary authorities: Fiji
| Dates | Type | Name | Source | Remarks |
| 1867
-July 1873 |
government issue | Fijian Treasury (headquarters Levuka, Fiji) | Fiji, Legal Tender Act, Cakobau Rex, No. 22, 23 July 1872, cited in Chalmers (1893: 292) | Shafer and Bruce (2000: 447) list the first note as being dated 1867, therefore I have started the period then. The act gave a more formal basis to a practice already in existence; Chalmers (1893: 292) observes that as of 30 June 1872, there were already local $25,110 of Treasury notes in circulation. |
| July 1873
-3 December 1914 |
government issue alongside free banking | Fijian Treasury (headquarters Levuka, Fiji) alongside multiple (3) note-issuing banks | Fiji Banking and
Commercial Company,
Fijian charter of 1873;
Union Bank of Australia, United Kingdom act of association, 7 July? 1837); other bank charters and articles of association; Knapman (1987: 1045-5) |
The first bank was the Fiji Banking and Commercial Trading Company (headquarters Levuka, Ovalau, Fiji), in July 1873, in Levuka. Its owners were affiliated with the Bank of New Zealand, and it was sold to that bank on 22 June 1876, after Fiji had become a British colony. By 30 September 1874, the government issue was only Fijian £200 (Chalmers 1893: 292). The second bank was the Union Bank of Australia (headquarters London, England), which opened a branch in Levuka in December 1880. It ceased operations in Fiji in 1895 following financial difficulties in Australia that led it to reduce its branch network. The Bank of New South Wales (headquarters Sydney, Australia) opened a branch in Suva in 1901 in June or later. |
| 4 December 1914
-30 June 1973 |
currency board | Board of Currency Commissioners (headquarters Levuka, Fiji / Suva, Viti Levu, Fiji from 1916) | Fiji, Ordinance No. 9 of 1913, cited in [Knapman 1987? Commissioners of Currency report? See at IMF]; Fiji Currency Notes Ordinance, July 1933, cited in Knapman (1987: 119); Reserve Bank of Fiji (1987: 8) | Established a currency board to gain seigniorage for the government. The ordinance of 1933 established a maximum reserve ratio of 120% for the currency board rather than the more usual 110% so that the board would have sufficient reserves should Fiji revalue its exchange rate from Fijian £1.11 = UK£1 to Fijian £1 = UK£1 (which did not happen in the 1930s). Fiji issued its first coins in 1934. The currency board began accepting deposits from commercial banks in late 1972, after the revaluation of the Fiji dollar on 25 October 1972 [citation from source at IMF-currency board report or IMF ARER]. Fiji joined the IMF on 28 May 1971. |
| 1 July 1973
-present (2005) |
central bank | Central Monetary Authority of Fiji / Reserve Bank of Fiji from 1 January 1984 (headquarters for both Suva, Viti Levu, Fiji) | Fiji, Central Monetary Authority of Fiji Act, No. 1, 5 April 1973, reprinted in Central Monetary Authority of Fiji annual report 1974: 81-102; Reserve Bank of Fiji Act, No. 14, 24 November 1983, cited in Central Monetary Authority of Fiji annual report 1983: 94 | The Central Monetary Authority was from the start a full-fledged central bank. |
Exchange rate arrangements: Fiji
| Dates | Official arrangement | Source | Unofficial arrangement, if different | Remarks |
| 1867
-18 August 1873 |
pegged; Fijian $1 = silver $1 | Fiji, Constitution Act of Fiji, 1871; Legal Tender Act, No. 22, 23 July 1872, cited in Chalmers (1893: 292) | Shafer and Bruce (2000: 447) list the first note as being dated 1867, therefore I have started the period then. The Constitution Act gave the right of coining money and regulating the currency to the newly declared king. The Legal Tender Act made government notes a legal (that is, forced) tender, and provided that they were payable in demand in gold or silver or in government bonds bearing 10% annual interest. These acts gave a more formal basis to practices already in existence. | |
| 19 August 1873
-12 October 1874 |
fixed; local £1 = UK£1; also US$1 = local 4 shillings 2 pence (US $25 = local £4) | Fiji, Order in Council of 19 August 1873, cited in Chalmers (1893: 292) | The Order in Council gave the Fiji Banking and Commercial company the exclusive right to issue bank notes, of a denomination not less than £1 sterling. Chalmers (1893: 293) reports that British silver coins already circulated widely in Fiji before 1875. The Order in Council prescribed ratings of U.S. and French coins in terms of British coins, for which reason I have classified it as making a change of the unit of account from dollars to pounds. | |
| 13 October 1874
-August? 1914 |
fixed; Fijian £1 = 7.32238g gold (= UK£1) | Fiji, governor's proclamation of 13 October 1874, confirmed by Ordinance No. 1 of 1875; United Kingdom, proclamation of 29 November 1881, promulgated in Fiji on 11 March 1882; all cited in Chalmers (1893: 293); Fiji, Ordinance No. 9 1913, cited in [Knapman? Narsey?] | Fiji adopted statutes then in force in New South Wales, Australia, including currency laws. "Foreign" coins, meaning those not issued by the United Kingdom and its colonies, were demonetized as of 1 December 1876 (Fiji, governor's proclamation of 16 October 1875, cited in Chalmers 1893: 293). The act of 1913 stated that notes of the currency board established by the act would be convertible into gold. The currency was named the pound after the pound sterling. | |
| August? 1914
-17? December 1929 |
fixed; in practice, Fijian £1 = UK£1 | Fiji, Ordinance No. 2 of 1917?, cited in [source-Knapman at IMF? Narsey?] | The currency board suspended payment in gold after the outbreak of the First World War. In practice, the banks exchanged Fijian pounds at Fijian £1 = UK£1, but that exchange rate was not established by law. The pound sterling in effect ceased being convertible into gold on 2 August 1914 broke out and did not resume until 27 April 1925. Fiji, Ordinance No. 1 of 1922, cited in allowed the government to suspend the convertibility of currency board notes into gold from time to time or to pay the notes in silver (such as British silver coins). | |
| 18? December 1929
-14? November 1933 |
fixed; Fijian £1 = UK£1 | Knapman (1987: 109-19) | In practice, a clean float paralleling the Australian pound to January 1931 and to the New Zealand pound from perhaps February 1931. The commoercial banks "managed" the exchange rate. | The Fijian pound depreciated along with the Australian pound against the pound sterling. The New Zealand pound was also depreciating against the pound sterling in this period. The Fijian pound depreciated against the pound sterling because, as noted for the previous period, the exchange rate was in the hands of two privately owned commercial banks, the Bank of New Zealand and the Australian-owned Bank of New South Wales, which were influenced by the currency depreciations in their home countries. The note issue of the currency board was theoretically redeemable in gold, but in practice notes were issued against drafts of pounds sterling, redeemable in silver (such as British silver coins) that could only be exported under license, at an exchange rate unofficially linked first to the Australian pound and then to the New Zealand pound. |
| 15? November 1932
-12 December 1932 |
fixed; Fijian £1 = UK£1 = 7.32238g gold | Fiji, announcement of Board of Currency Commissioners, 15 November 1932, cited in Knapman (1987: 112) | On 21 October 1932,the British Colonial Office instructed the Board of Currency Commissioners to cease the issuance of notes against drafts in pounds sterling, which was technically illegal under Fijian law. In response to pressure from the British government to end the depreciation of the Fijian pound, the Commissioners of Currency announced that henceforth they would only issue notes in exchange for 20% gold and 80% pounds sterling, and that from 1 December 1933 they would only issue notes in exchange for gold. | |
| 13 December 1932
-28? March 1933 |
fixed; Fijian £1 = New Zealand £1 (but see Remarks) | Fiji, Currency Notes Amendment Bill, 13 December 1932, cited in Knapman (1987: 113) | British colonial officials and Fiji's Legislative Council overrode the decision of the Commissioners of Currency for fear of creating a shortage of notes that would hinder the record sugar harvest. Fiji temporarily linked its currency to the New Zealand pound, and the currency board was allowed to issue notes against drafts on New Zealand currency for a temporary period of six months. On 20 January 1933, the New Zealand pound was devalued from New Zealand £1.11 = UK£1 to New Zealand £1.25 = UK£1, making the New Zealand pound again equal to the Australian pound. The Fijian pound followed. | |
| 29? March 1933
-27 November 1967 |
fixed; Fijian £1.11 = UK£1 | Fiji, resolution of 28 March 1933; Fiji Currency Notes Ordinance, July 1933; both cited in Knapman (1987: 116, 119) | On instructions from the British Colonial Office, Fiji adopted the pound sterling as the anchor currency, at the cross rate with the New Zealand pound before 20 January 1933. The reason for adopting the pound sterling rather than the New Zealand pound was a desire by influential interests in Fiji to avoid the risk of further devaluations of the New Zealand pound against the pound sterling. The currency board was allowed to issue notes against drafts on pounds sterling. The Fiji Currency Notes Ordinance, which became effective on 1 November 1933, laid to rest controversy over the exchange rate (cited in Knapman 1987: 119). | |
| 28 November 1967
-12 January 1969 |
fixed; Fijian £1.045 = UK£1 | Great Britain, report on Fiji, 1967: 25 | Revalued slightly against the pound sterling following the pound sterling's devaluation of 18 November 1967. | |
| 13 January 1969
24 October 1972 |
fixed; Fiji $2.09
= UK£1 |
Great Britain, report on Fiji, 1970: 28 | Introduced a decimalized currency at Fiji $2 = Fijian £1. An exchange rate of Fiji $1 = US$1.4832 was agreed between the United Kingdom and the IMF, but after becoming independent and joining the IMF on its own, Fiji had not registered a par value with the IMF before the Bretton Woods system began to break apart in 1971. The currency was named the dollar in imitation of the U.S. dollar, to whose value the new unit was closer than to that of the pound sterling. Gold convertibility for all countries ended in practice when the United States abandoned the gold standard on 15 August 1971. Foreign-exchange transactions were suspended on 23 June 1972 and resumed on 26 June 1972. | |
| 25 October 1972
-30 June 1973 |
fixed; Fiji $1.98
= UK£1 |
IMF ARER (1973: 169) | Revalued against the pound sterling to offset the decline of the pound sterling against the US dollar at the time. | |
| 1 July 1973
-9 September 1973 |
pegged; Fiji $1.98
= UK£1 |
Central Monetary Authority of Fiji, annual report, 1974: 62 | Fiji replaced its currency board with a monetary institute, which held domestic assets, so the exchange rate changed from fixed to pegged. | |
| 10 September 1973
-24 February 1974 |
pegged; Fiji $1.88
= UK£1 |
IMF ARER (1974: 155) | Revalued following revaluations by Australia on 9 September 1973 and New Zealand on 10 September 1973. | |
| 25 February 1974
-6 April 1975 |
pegged; Fiji $1 = US$1.25, or Fiji $1 = 0.920828g gold (nominally) | Central Monetary Authority of Fiji, annual report, 1974: 47; IMF ARER (1975: 178) | Switched to the US dollar as the anchor currency. The exchange rate between the pound sterling and the US dollar was experiencing what by the standards of the time were considered large fluctuations. In making the switch, Fiji made a revaluation of 1.5% compared to the prevailing cross rate between the pound sterling and the US dollar, so as to make the exchange rate a round number (Fiji $0.80 = US$1). Fiji did not register the gold parity with the IMF; the IMF source calculates it from the rate with the US dollar. Fiji adopted wider margins at the start of the period. | |
| 7 April 1975
-31 March 1978 |
flexible basket; inoperative gold parity Fiji $1 = 0.920828g gold (nominally) | Central Monetary Authority of Fiji, annual report, 1975: 27; IMF ARER (1975: 173-4) | Ceased pegging to the US dollar and determined the exchange rate on the basis of a weighted average of the currencies of Fiji's major trading partners. Initially the basket was comprise of the US, Australian, and New Zealand dollars plus the pound sterling and Japanese yen. In the period after this the German mark was added. The purpose of switching the anchor to a basket was to achieve greater stability of the real exchange rate. On 29 November 1976, after Australia and New Zealand depreciated their currencies, Fiji depreciated its currency from Fiji $1 = US$1.0889 to Fiji $1= US$1.0276 as a result of the depreciation of the Australian dollar in the basket. The intervention currency was the US dollar. | |
| 1 April 1978
-present (2005) |
flexible basket | International Monetary Fund, Board of Governors, Resolution No. 31-4, 30 April 1976 ("Second Amendment"); Reserve Bank of Fiji annual report, 1986: 119, 1987: 100; IMF ARER (1983: 193, 1987: 209); Reserve Bank of Fiji, announcement of 20 January 1998, cited in news reports of that date | The system of gold part values officially ended by agreement of IMF members. Later, on 1 February 1982, as a result of an economic policy package, the exchange rate was pegged at an index level of 83.4 for most of the year. On 7 March 1986, the central bank changed the weights in the basket, giving more weight to currencies in the region as opposed to the US dollar and pound sterling; The central bank devalued the currency by the following amounts against the basket on the following dates: 13 March-2 May 1986, gradual depreciation totaling 5%; 29 June 1987, 17.25%, and 7 October 1987, 15.25% (the purpose of these depreciations was to halt capital flight after a military coup of 14 May 1987); 20 January 1998, 20% (as a result of fallout from the East Asian currency crisis, especially in Indonesia at the time). The Reserve Bank of Fiji's annual report for 1984 (p. 99) is the first place that specifies the currencies comprising the basket. IMF ARER (2003: 355) says the weights in the basket (Australian dollar, European euro, Japanese yen, New Zealand dollar, and US dollar) are based on 3-year moving averages of Fiji's trade and are reviewed annually. |