TT has US$7.4b import cover for eight months

TT has eight months of import cover, estimated at US$7.4 billion, the Central Bank reported on Tuesday.

The amount is US$513.4 million higher than the end of 2019, the bank said in its July 2020 economic bulletin.

The bank said gross reserves were boosted by drawdowns from the Heritage Stabilisation Fund (HSF) and government borrowings. Government accessed the HSF to help finance the social relief grant programme in response to the covid19 pandemic.

Amid laments from the business sector of challenges to get foreign current, the bank said it continued to intervene in the market and "sales to the authorised dealers amounted to US$890 million in the year to August 2020."

"The increase in gross official reserves suggests that the external accounts registered an overall surplus during the first eight months of 2020," the bank said.

In an effort to boost borrowings, the bank maintained the repo rate at 3.5 per cent in June, following a 150 basis points reduction in March, when it also cut commercial banks’ reserve requirement by 300 basis points. The move occurred during the covid19 lockdown when many businesses, especially in the manufacturing sector, put operations on hold. Commercial banks lowered interest rates during this period.

The measures, along with higher net maturities of open market operations and increased fiscal injections, helped push excess liquidity to a daily average of $7.3 billion over the first eight months, compared to $3.3 billion over the same period in 2019. The excess cash in the system did not encourage businesses to borrow.

"However, the deliberate boost to liquidity has not yet engendered a pickup in private sector credit on the whole, especially business lending," the bank reported.

But more people borrowed in the face of job loss and financial uncertainty. The bank said more than 300 people were retrenched in the first half of the year.

"Nevertheless, consumer lending continued to be robust, supported mainly by lending for debt consolidation and refinancing. Reflecting falling interest rates in the US market, the TT-US rate differential improved to 86 basis points at the end of August."

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