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$561.6m liquidity

Filipe Naigulevu
Friday, February 02, 2018

DESPITE falling over the month of December 2017, the liquidity in Fiji's banking system remained generally high at $561.6 million as of January 30.

According to the Reserve Bank of Fiji's (RBF) January 2018 Economic Review, excess liquidity measured by bank demand deposits fell over the month in December 2017 by 12.1 per cent.

This registered a decrease of ($83.4m) to $606.0m; attributed to a decline in foreign reserves ($38.2m) coupled with increases to statutory reserves deposits ($1.7m) and currency in circulation ($40.3m).

Liquidity generally remained high in most months last year reaching high records at $756.1m as of August 31, $740.4m in July and $735.8m recorded earlier in June of last year.

In the September quarter of last year, liquidity rose by 8.9 per cent to $801.1m and later fell over the month of November standing at $597.7m as of December 28.

Looking at the liquidity over the past few years, it had recorded a general downward trend, where it declined from a high of $773m in November 2013 to just under $400m in early 2017.

High liquidity last year also contributed to the tightening in credit standards along with funding costs and credit worthiness of customers.

This was mainly attributed to the absence of a credit reporting agency in the past year.

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 build up 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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