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Liquidity stands at $801.1 million

Filipe Naigulevu
Saturday, November 04, 2017

TOTAL liquidity in Fiji's banking system rose in the September quarter by 8.9 per cent to $801.1 million, measured by commercial banks' demand deposits.

This was highlighted in the Reserve Bank of Fiji's quarterly review for September this year released recently by the central bank.

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.

According to RBF, the growth in liquidity was mainly attributed to the increase in foreign reserves over the quarter ($121.1m).

At the end of September, foreign reserves (RBF Holdings) stood at $2,406.8m, sufficient to cover 6.0 MORI of goods and non-factor services.

Excess liquidity in Fiji's banking system had also increased over the recent months, which stood at $756.1m as of August 31, $740.4m in July and $735.8m recorded earlier in June of this year.

In the past few years, Fiji's bank liquidity had recorded a general downward trend, where it declined from a high of $773m in November 2013 to just under $400m in early 2017.

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.

The large pool of liquidity also complements the current monetary policy stance of supporting growth by not putting upward pressure on lending rates.

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