NewsWhore
03-19-2009, 07:40 PM
Economist Hector Guiliani Cury says that individuals and businesses are borrowing less due to the relatively high interest rates that continue to prevail, as reported in Hoy. He said that bank credit to the private sector declined by RD$9.8 billion from December 2008 to 6 March 2009, by RD$8.6 billion from December 2008 to 26 February 2009, and RD$6.2 billion from 30 Jan 2008 to December this year. He said that in the 12 days from 2 February to 6 March 2009, bank credit declined by RD$1.3 billion.
He said that the decline in borrowing reflects the drastic contraction of the economy as a result of the reduction in consumer spending and private investment. He attributed this to the Central Bank's restrictive monetary policies. "It is evident that the small decline in bank interest rates, registered to date, has not been enough to prevent the decline in borrowing, and much less to increase it," said Guiliani Cury. He said that the authorities wanted to stimulate demand and reactivate the economy, but in order to do so they need to significantly increase money in circulation and reduce the rate on deposits to the minimum so that banks, finding themselves with excess liquidity, would then reduce the interest rates and consumers may resort to credit for their purchases.
Guiliani Cury says that a successful monetary policy is measured by an increase in borrowing, not by a reduction in interest rates. He said that of the RD$7.5 billion the Central Bank released from bank reserve restrictions, the banks have only lent out RD$700 million. Guiliani Cury called for a reduction in the bank reserve levels and a ban on the Central Bank placing certificates of deposit during the duration of the economic contraction.
More... (http://www.dr1.com/index.html#4)
He said that the decline in borrowing reflects the drastic contraction of the economy as a result of the reduction in consumer spending and private investment. He attributed this to the Central Bank's restrictive monetary policies. "It is evident that the small decline in bank interest rates, registered to date, has not been enough to prevent the decline in borrowing, and much less to increase it," said Guiliani Cury. He said that the authorities wanted to stimulate demand and reactivate the economy, but in order to do so they need to significantly increase money in circulation and reduce the rate on deposits to the minimum so that banks, finding themselves with excess liquidity, would then reduce the interest rates and consumers may resort to credit for their purchases.
Guiliani Cury says that a successful monetary policy is measured by an increase in borrowing, not by a reduction in interest rates. He said that of the RD$7.5 billion the Central Bank released from bank reserve restrictions, the banks have only lent out RD$700 million. Guiliani Cury called for a reduction in the bank reserve levels and a ban on the Central Bank placing certificates of deposit during the duration of the economic contraction.
More... (http://www.dr1.com/index.html#4)