The Reserve Bank of Vanuatu (RBV) has dismissed public claims suggesting that the new vatu valuation announced by the Minister of Finance, Johnny Koanapo, and made effective on October 3, was a devaluation of the national currency.

In an interview with VBTC News, Governor of the Reserve Bank, August Letlet, explained that the change was a realignment of the vatu’s value , not a devaluation.

He said the vatu operates under what is known as a “pegged exchange rate system,” which allows the Reserve Bank, under the RBV Act, to conduct annual assessments to ensure that the value of the vatu remains consistent with the currencies in its trading basket.

“This is not a devaluation. When you devalue, it means the government decides to lower the currency’s value. But this is a readjustment or realignment , correcting the value of the vatu in the basket. This should have been done long ago,”
— Governor August Letlet

Governor Letlet confirmed that, since October 3, the RBV has been issuing updated exchange rates to commercial banks every morning at 9am.

He said the last comprehensive review of the vatu’s basket had not been done for many years, leading to an imbalance in the currency’s strength.

“For a long time, the vatu was too strong or expensive. The latest review by the IMF showed that the rates in the basket had changed, so the vatu needed to be adjusted to reflect the real economic conditions,”
— Governor August Letlet

According to the RBV, this realignment makes the vatu’s value more accurate and affordable, and reflects the true state of the Vanuatu economy in relation to its trading partners.