Liquidity marginally drops to $562.9m in February
31 March, 2018, 12:00 am
EXCESS liquidity in Fiji measured by banks’ demand deposits (BDD) fell marginally in February 2018 to $562.9 million, the Reserve Bank of Fiji (RBF) Economic Review stated.
The drop in liquidity was attributed to the declines in statutory reserve deposits (-$18.9m) and currency in circulation (-$3.3m) which more than offset the decline in foreign reserves (-$21.2m) over the month.
The central bank stated that as at March 28, BDD stood at $537m.
In December 2017, excess liquidity also fell by 12.1 per cent ($83.4m) to $606m because of a decline in foreign reserves ($38.2m) coupled with increases to statutory reserves deposits ($1.7m) and currency in circulation ($40.3m).
As of February 26, excess liquidity was $561.2 million, compared with $562.8m at the end of January 2018.
But recent liquidity levels are generally lower than it was recorded by the central bank in its quarterly review for September 2017.
According to the September quarter review last year, total liquidity in Fiji’s banking system rose in the September quarter by 8.9 per cent to a high $801.1m.
The growth in liquidity during the September 2017 quarter was mainly attributed to the increase in foreign reserves over the quarter.
Liquidity, simply put, are excess funds that our commercial banks have at the end of each day that have not been lent out to borrowers.
These funds are deposited by commercial banks with the RBF and do not accumulate any interest. With Fiji’s economy being mainly driven by consumption, the level of liquidity in the banking system has a bearing on the level of consumption and investment activities in the economy.
The buildup in liquidity may signal positive support for commercial banks in their issuance of loans.
It can also mean that commercial banks have a significant amount of loans that have been approved, but are not fully drawn/utilised.