 13 - 19 December 2000 |
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Central Bank money market report - October Broad money, consisting of currency in circulation and residents' deposits with the banking system, expanded by Lm20.7 million, or 0.8 per cent, in October. As a result, broad money’s annual rate of growth accelerated by more than half a percentage point to 5.6 per cent. Monetary expansion during the month was driven by an increase in domestic credit and by growth in the net foreign assets of the deposit money banks. Meanwhile, narrow money fell by Lm4.6 million, with the annual rate of growth falling to 8.1 per cent as a result. Demand deposits, mainly those belonging to the corporate sector, contracted by Lm4.8 million and accounted for the entire drop. Currency in circulation increased marginally. Quasi-money, on the other hand, rebounded during the month, expanding by Lm25.3 million, or 1.3 per cent, after having declined in the two previous months. Savings deposits added Lm4 million as corporate deposits rose, while time deposits expanded by Lm2l.3 million, or 1.7 per cent, as increases in corporate deposits and in those belonging to public sector enterprises outweighed a drop in deposits belonging to households. The main determinant of monetary growth was domestic credit, which expanded by Lm9.6 million, or 0.4 per cent, during the month. Consequently, the annual rate of credit growth rose by over half a percentage point to 8.9 per cent. Net claims on Government, which rose by Lm27.9 million as banks increased their holdings of Government securities, accounted for the entire addition. In contrast, claims on the private and parastatal sectors contracted during the month, by Lml8.3 million, or 1 per cent. Bank lending to public sector enterprises fell by Lm7.9 million, or 3.2 per cent, partly as a result of write-offs. At the same time, claims on the private sector dropped by Lml0.4 million, or 0.7 per cent, with lending to most major categories of borrower declining. The drop may reflect the issue of capital market instruments by two private firms as well as increased loan repayments. With regard to the other main determinant of monetary growth, the net foreign assets of the banking system, these dropped by Lm10.1 million. However, most of the contraction took place in the net foreign assets of the international banks and had no impact on monetary aggregates. The Central Bank's external reserves decreased by Lm7.7 million, or 1.1 per cent, as a result of net sales to banks and payments for fuel imports. Meanwhile, those of the deposit money banks rose by Lm24.6 million, largely reflecting capital inflows by the corporate sector, whereas the net foreign assets of the international banks declined by Lm27.1 millions. | ||||||
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