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Liquidity drops

Filipe Naigulevu
Monday, December 04, 2017

DESPITE falling over the month of November, the central bank says liquidity in Fiji's banking system remains adequate to cater for an upswing in credit.

The Reserve Bank of Fiji (RBF) in its Economic Review for the month ended November stated that liquidity stood at $689.5 million as of November 30.

The central bank also noted that total commercial banks' lending grew at a slightly lower pace in the year to October compared with the corresponding period in 2016.

According to the review, lending rates hovered at low levels after declining over the year while time deposit rates increased comparing both with the same period last year.

The central bank stated that domestic credit also slowed further in the review period owing to a deceleration in private sector credit.

This was attributed, in turn, to the slowdown in commercial bank lending to the building and construction and private individuals sectors.

And while monetary conditions are conducive to growth, RBF states that the financial system is stable. Excess liquidity generally remained high at significant levels over the early quarters of this year.

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

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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