Excess liquidity in the banking system reached a historical high of $1.1 billion last month says the Reserve Bank of Fiji.

The RBF states this was driven by the increase in foreign reserves which in turn was underpinned by government external borrowing.

Governor Ariff Ali mentioned that liquidity in the banking system is envisaged to remain ample in the foreseeable future and continues to place downward pressure on market interest rates, which generally fell in August.

However, he says domestic credit contracted in the review month, driven by the decline in lending to the private sector.

The Governor says the outcome is reflective of a general tightening in lending standards amid the subdued economic environment.

Annual inflation slid further to -3.0 percent last month from -1.6 percent in July, primarily influenced by lower prices of alcoholic beverages, yaqona, food and fuel.