KEY POINTS:
Fiji's interim Government is fast running out of options to put its troubled economy back on the rails.
In keeping with its zeal to clean-up public life - which was the declared reason for the December coup - its economic measures have tended to concentrate on curbing government expenditure by downsizing ministries, cutting civil servants' salaries and controlling departmental spending.
In his much-quoted sink-or-swim revised Budget three months after the coup, Finance Minister Mahendra Chaudhry proposed these belt-tightening measures in addition to raising import duty on luxury goods and bumping up excise duty. A lower import tariff on foodstuffs and keeping the status quo on VAT - against a 2.5 per cent rise proposed by the ousted government - sought to soften that blow.
But in a depressed environment with such negative sentiment, these measures are beginning to prove ineffective.
In his Budget, Chaudhry had provided realistically for the GDP to shrink 2 per cent in contrast to the Laisenia Qarase government's estimated expansion.
The warning signs are all there: imports and exports have shrunk, VAT collection has plummeted and credit conditions are tighter.
So far the interim Administration has shown little initiative in opting for harder measures, especially to shore up foreign exchange reserves. They have dipped to a level that can cover only three months of imports - and that includes funds raised by selling bonds on the international market by the previous Administration just a few months before the coup.
One such tough measure would be devaluing the Fiji dollar. Dr Satish Chand, Associate Professor of Economics at the Australian National University, believes that the Reserve Bank of Fiji should have devalued the currency soon after the coup instead of raising interest rates to dampen import demand. The interest rate move has not worked, Chand says, and being weighted against Australian, New Zealand and Japanese currencies - all of which have been strong against the greenback - the Fiji dollar is overvalued by as much as 12 per cent.
Biman Prasad, Professor of Economics at Suva's University of the South Pacific, agrees and says: "It appears that our exchange rate may be overvalued and this could be hurting our exports. But the problem for us is that we don't have the capacity to export.
"We need to build capacity in sectors where exports could increase in the short term.
"Fruits, vegetables and root-crops have great potential."
While it may be an option, devaluation is a political hot potato. Chaudhry has so far precluded the option, perhaps understandably so given the intense short-term pain that devaluation would cause: imports would be dearer and the increased cost of fuel would have its own cascading effect, spiking inflation which already stands at over 6.6 per cent against far lower forecasts earlier.
The tourism sector would certainly gain, especially if the numbers improved, but that would hardly counter the political fallout of devaluation.
Wage cuts, increases in excise duty and rising unemployment have already depressed consumer demand across almost all sectors (VAT collection is down 7.5 per cent).
The closure of the Vatukoula goldmine in the same week as the coup took 1700 people out of the national workforce, adding greatly to the interim Administration's woes in its early days.
If devaluation is not to be an option for the moment, the Government will have to do everything it can to increase its capital inflow - it needs to step up exports, attract foreign direct investment and bring in more tourists.
Stiff competition from Asian countries has sped up the decline of Fiji's once-booming garment industry and the European Community's phasing out of preferential purchase pricing for sugar, beginning this year, will contribute to declining national income. In any case, the country's sugar industry has been mired in a range of problems for several years now.
New Zealand and Australia's "smart"sanctions - which so far have seemed to affect only travel by interim Administration members - will soon begin to take their toll on the economy.
Barring Fiji citizens from New Zealand's seasonal worker scheme and campaigning at the United Nations to get it to decline to employ Fiji Army personnel on future peacekeeping missions will also tell heavily on foreign currency repatriation.
Last week, Chaudhry accused both New Zealand and Australia of conspiring to destroy Fiji's economy by trying to block international aid assistance and loans from international banks, a charge that the Australian Government strongly rejected.
That leaves two options: first, promoting tourism by tapping newer markets in the face of continuing cautionary travel advisories from the New Zealand and Australian Governments; and second, luring big-ticket investors.
In the past few months, Chaudhry and other ministers have visited Asia to promote tourism and investment. They have claimed a good response, but it remains to be seen how much of it will translate into much-needed dollars.
But despite the travel advisories, tourism between January and May this year was only 4.7 per cent below last year for the same period, says a Reserve Bank of Fiji report. Nevertheless, it would be a tough task to push tourism numbers higher given the negative perception of Fiji's economy.
When slow growth in infrastructure and power generation is added to the perception of Fiji being perpetually unstable, it will be hard to attract investors to set up shop.
This week the Government said it has approached China for a low-interest long-term loan with an option to convert it into a grant for infrastructure development in the hope of attracting foreign direct investment.
China has reportedly earmarked NZ$778 million to aid Pacific Island infrastructure projects.
Seven months after the coup, and despite all these measures, Fiji's economy remains weak.
There does not appear to be a clear strategy and the Administration has other problems looming that could affect the economy - one of them being the impending nationwide industrial strike.
It has undoubtedly inherited some of these problems from previous governments, but having jockeyed itself into this position it must deal with them.
Australian academic Ron Duncan, director of the Pacific Institute of Advanced Studies in Development and Governance, although not condoning the coup, surprised many when he said: "Many of the obstacles to economic growth in Fiji is something that only a government such as the interim Administration can do, or can do within a reasonable time."
Although the Fiji Government may take encouragement from that, the only realistic way out is for it to demonstrate that it has marked out a clear path to restoring a democratic government in a credible timeframe. It must win the international community's confidence.
