Page 10 - aruba-today-20220412

Tuesday 12 april 2022 locAl
A10

The Central Bank of Aruba raised the reserve requirement rate by

two percentage points as of March 1, 2022, to reduce commercial

banks’ excess liquidity

Oranjestad - During its million in December 2021,
meeting of February 10, compared to Afl. 1,107.4
2022, and after reviewing million in December 2020
the most recent economic (Graph 3).
and monetary data, the
Monetary Policy Commit- The monthly comparison
tee (MPC) of the Centrale ingly, the level of reserves rose by 3.6 percent com- showed an expansion in
Bank van Aruba (CBA) de- International reserves remained adequate when pared to the correspond- aggregated excess liquid-
cided to raise the reserve International reserves (in- benchmarked against the ing month a year earlier. ity in December 2021, com-
requirement rate from 14.0 cluding revaluation differ- current account payments The twelve-month average pared to November 2021,
percent to 16.0 percent as ences of gold and foreign and the IMF ARA metric inflation rate amounted to despite a one percentage
of March 1st, 2022. exchange holdings), up (Table 1). 0.7 percent in December point increase in the re-
to and including January 2021, 0.5 percentage point serve requirement on the
This decision was primarily 21, 2022, increased by Afl. Credit developments higher than the previous 1st of December 2021. The
based on the elevated lev- 49.8 million compared to In December 2021, total month (Graph 2). The rise increase in the reserve re-
el of excess liquidity at the the end of December 2021. credit of the commercial in the CPI compared to quirement rate was coun-
commercial banks, and The growth in the interna- banks contracted by Afl. a year earlier was mainly terbalanced by a rise in
the modest effect of the tional reserves was mainly 139.3 million or 3.5 percent caused by higher gasoline the total liquid funds held
previous increases in the re- driven by tourism services. to Afl. 3,824.8 million, when prices, which also affected by the commercial banks.
serve requirement rate on Meanwhile, official reserves compared to the end the ‘transport’ component Consequently, the level
the level of excess liquidity rose by Afl. 16.5 million. of 2020. This decline was (1.9 percentage points of excess liquidity went up
at the commercial banks. Consequently, the official caused by the categories contribution). This increase and remained significantly
and international reserves ‘other’ (-Afl. 90.0 million/ was amplified by higher above pre-pandemic lev-
The following information reached, respectively, -17.7 percent), ‘loans to in- prices for the components els.
and analysis were consid- Afl. 2,761.4 million and Afl. dividuals’ (-Afl. 26.0 million/ ‘household operation’ (0.6
ered in reaching this deci- 3,179.4 million as of January -1.4 percent), and ‘business percentage point contribu- The elevated level of ex-
sion: 21, 2022 (Graph 1). Accord- loans’ (-Afl. 22.4 million/ -1.5 tion), ‘food’ (0.5 percent- cess liquidity at the com-
percent). The fall in the cat- age point contribution), mercial banks is partly the
egory ‘other’ was primarily ‘recreation and culture’ result of the continued
the result of a lower amount (0.3 percentage point con- subdued credit demand.
of government bonds held tribution), ‘miscellaneous Furthermore, the wage
by the local commercial goods and services’ (0.2 subsidy and FASE programs
banks. The drop in the cat- percentage point contri- of the GoA to cushion the
egory ‘loans to individuals’ bution), ‘housing’ (0.1 per- economic effects of the
was due to a decrease in centage point contribu- COVID-19 crisis likely also
‘consumer credit’, which tion), and ‘restaurants and contributed to the high lev-
was only partly mitigated hotels’ (0.1 percentage el of excess liquidity.
by an increase in housing point contribution). These
mortgages. The contrac- upturns were slightly off- Meanwhile, the prudential
tion in the category ‘busi- set by lower prices for the liquidity ratio of the com-
ness loans’, in turn, resulted ‘health’ component (-0.1 mercial banks, which mea-
from downturns in commer- percentage point contribu- sures the percentage of
cial mortgages, as well as tion). All other components their liquid assets to their to-
current account and term remained unchanged. tal net assets, remained at
loans. a comfortable level of 38.0
Commercial bank liquidity percent in December 2021,
Inflation The aggregate excess li- far above the minimum re-
In December 2021, the quidity of commercial quired prudential liquidity
Consumer Price Index (CPI) banks rose to Afl. 1,320.5 ratio of 18.0 percent.q