According to a press release by the RBF, the OPR has been dropped from 0.50 percent to 0.25 percent or 25 basis points and is the central bank's recommended rate for commercial banks to use as a basis to issue loans.
RBF Governor Ariff Ali said due to declining consumer and business confidence, the reduction should provide necessary stimulus to the domestic economy.
Bank liquidity remains adequate at 669 million Fijian dollars (about 292 million U.S. dollars) as on March 17 while foreign reserves are also adequate at 2,264 million Fijian dollars (about 989 million U.S. dollars) as on Wednesday.
The RBF hopes a reduction in the OPR will help stimulate demand by reducing the cost of borrowing and support much-needed consumption and investment.
Consumption and investment are also showing signs of slowing down while credit growth continues to decelerate.
The OPR is not a compulsory directive to commercial banks, but an effort to influence the commercial lending market.
The RBF adds the negative effects of COVID-19 on the tourism industry will affect wholesale and retail trade, construction, transport and manufacturing sectors, including government's revenue.
Ali said the magnitude of the economic slowdown will depend on how long the pandemic persists.