Analysis and News

BOG money reserve grew 2.3% for 2021 first quarter

BY GEOCAP's Contributor: Richard Bhainie

The Bank of Guyana saw some 2.3 percent growth in its money reserve for the first quarter of 2021 from 6,639 million GYD to 299,760 million GYD from its end-December 2020 level.

Up to end-March, 2021, reserve money expanded by 6,639 million GYD compared with a growth of 2,434 million GYD for the corresponding period in 2020, the Bank of Guyana reported in its First Quarter Report 2021.

The 2.3 percent growth reflects an 11.8 percent growth in net domestic assets to 161,789 million GYD resulting from an 8.9 percent expansion in liabilities to the commercial banks while net foreign assets fell by 7.9 percent to 129,971 million GYD.

The country saw currency in circulation decline by 3.9 percent, however, broad money increased by 2 percent or 10,230 million GYD to 531,246 million GYD, due to expansions in net domestic credit and other items (net) which offset the decline in net foreign assets.

The growth in broad money was reflected in increases in both narrow money and quasi money.

Narrow money, consisting of currency in circulation, private sector demand deposits and cashiers’ cheques and acceptances, was higher by 1.4 percent or 4,247 million GYD which resulted mainly from a 7 percent and 4.3 percent growth in demand deposits and cashiers’ cheques & acceptances, respectively.

Quasi money, which consists of time and savings deposits, grew by 2.7 percent or 5,983 million GYD which stemmed from the 2.8 percent and 1.9 percent increase in savings and time deposits, respectively.

The Central Bank reported that total deposits by residents and non-residents were higher for the reported period by 3.7 percent to 532,361 million GYD. Private sector deposits, which accounted for 74.9 percent of total deposits by residents grew by 4.4 percent.

Total reserves deposited with the Bank of Guyana increased by 12.4 percent to reach 141,282 million GYD for the reported period. The required statutory reserves of the banks increased by 3.6 percent or 1,837 million GYD reflecting higher deposit liabilities of the commercial banks.

Reserves in excess of the minimum requirement stood at 88,914 million GYD at the end of March 2021, 18.4 percent higher than the end-December 2020 position which was mainly due to the temporary reduction of the reserve requirement ratio from 12 percent to 10 percent from August 24, 2020 – June 30, 2021 in keeping with the agreement between the Bank of Guyana and the Commercial Banks in relation to COVID-19 supplementary relief measures.

Bank of Guyana reported that their monetary policy continued to focus on the attainment of price stability while ensuring an adequate level of liquidity to provide for private sector credit and economic growth.

“The Bank seeks to allow the expansion of broad money along a path consistent with projections for output and inflation. Thus, weekly targets for broad money are translated into targets for base money using the money multiplier,” the Bank of Guyana said in their report.

“To achieve these weekly base money targets, the Bank focuses on the effective management of excess liquidity in the financial system through its Open Market Operations. The Bank may also purchase and sell foreign currency to achieve its primary objective,” they added.

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