SUVA, April 15 (Reuters) - Fiji's deteriorating political crisis saw the South Pacific nation's credit rating cut by Standard & Poor's on Wednesday and its central bank devalue the local dollar by 20 percent to boost tourism, a sector badly damaged by past coups.
Fiji has been plunged into a political crisis after the president reappointed military chief Frank Bainimarama as interim prime minister on Saturday, less than two days after a court ruled his 2006 coup and subsequent government illegal.
Bainimarama tightened media censorship on Wednesday and continued to refuse to hold elections before 2014.
The Australian Broadcasting Corp. said local technicians had been ordered by the military government to shut down two FM relay stations in the capital Suva and the western sugar town of Nadi.
But ABC said its Radio Australia news programme was still broadcasting on shortwave transmitters.
Raw Fiji News (www.rawfijinews.wordpress.com) reported that some internet cafes had been told to close, while "internet investigators" inspect business permits, software and archives.
Since his reappointment, Bainimarama has imposed emergency restrictions, which has seen troops controlling media and government offices, to gag opposition to his reforms.
Standard and Poor's said on Wednesday it had cut Fiji's long-term rating to B minus from B and its short-term rating to C from B, due to "Fiji's deteriorating political environment".
"The negative rating outlook reflects the likelihood of a further rating downgrade if Fiji's political settings, external position, and growth prospects continue to deteriorate," it said.
Fiji has $150 million of outstanding dollar bonds maturing in 2011. The bonds, paying a coupon of 6.875 percent, are not actively traded and were last quoted at 72.9/74.9 cents to the dollar. Fiji, a former British colony, has suffered four coups and a military mutiny since 1987, fuelled by tensions between indigenous Fijians and economically powerful ethnic Indians.
DEVALUATION
The Reserve Bank of Fiji devalued the Fiji dollar on Wednesday, saying the devaluation would boost tourism, generate jobs and counter the impact of the global financial crisis.
The local dollar was quoted at US$0.4558 by the central bank, down from US$0.5732 on Tuesday.
But opposition politician Mahendra Chaudhry said the devaluation would only make life tougher for Fijians, forcing up the cost of living for the predominately rural population.
"It will undermine confidence in Fiji's economy, deter investment and cause severe hardship to the poor," Fiji Labour Party leader Chaudhry said in a statement.
The former finance minister said the devaluation would substantially increase Fiji's debt-service charges.
"If the real objective to devalue is to arrest the flight of capital, this would have been better achieved through tighter monetary controls already put in place," he said.
The central bank on Tuesday imposed tight exchange controls to protect dwindling foreign reserves.
Fiji's central bank reports reserves have fallen to US$329 million (5.4 percent of GDP) in March 2009, from US$618 million at the end of 2007 (10.3 percent of GDP), said Standard & Poor's.
The agency said reserves may fall further because of the intensifying political pressures and recent floods which have harmed Fiji's key earners of foreign exchange, tourism and sugar.
It said the postponement of elections until 2014 was likely to delay the resumption of improved relations with neighbouring countries and key regional groupings.
"This will hinder a fuller recovery in tourism arrivals at a time when global international conditions have already weakened tourism," said Standard & Poor's credit analyst Kyran Curry.
The president has said Bainimarama's interim government should reform the racially-divisive electoral system and hold fresh elections by September 2014.
Bainimarama said an electoral commission survey had shown that 64 percent of Fijians wanted to end elections based on communal voting, but the court of appeal ruling against his government would have forced another race-based election.
"All they (the judges) wanted was to force us to go into elections, which we did not want with the old system. The majority of people in Fiji have decided we want electoral reform," Bainimarama told Radio New Zealand in an interview.
"By September 2014 we will have a new government." ($1 = F$0.57) (Writing by Michael Perry; Editing by Sugita Katyal)