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Central bank expects 10-11% rise in money supply |
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(19 August 2004, Wednesday - Philippine Daily Inquirer)
Inquirer News Service THE BANGKO Sentral ng Pilipinas (BSP, the Philippine central bank) has estimated that the money supply will increase by 10- 11 percent this year and next as it seeks to capture more undocumented sources of liquidity in the economy, a BSP official told the Inquirer. Domestic liquidity, or M3, the broadest measure of money circulating in the economy, grew 4.3 percent year-on-year in 2003 and 5.7 percent in the first half of this year. M3 includes money in circulation, demand deposits, money market funds and short-term repurchase agreements. The official explained that the BSP was being conservative in projecting the growth in domestic liquidity as more sources of liquidity were being identified. The BSP is probing undocumented sources of domestic liquidity that can impact on foreign exchange trading as well as overall monetary policy, he said. So far, it has identified three sources: • "under-the-table" reverse repurchase agreements and trust activities involving fund-raising by banks, using their securities holdings; • instruments of trust, a fiduciary relationship in which a person, a trustee, holds title to property or assets for the benefit of another person, the beneficiary; and • dollars brought in by overseas Filipino workers and not coursed through the banking system. An increase in M3 is usually attributed to expansion in net foreign assets of the monetary system and an increase in domestic credits to both the public and private sectors. Steady growth in the net foreign assets hinges on an increase in foreign assets of the monetary system, mainly in the form of investments in foreign currency-denominated securities by banks and the BSP. The seasonal inflow of dollars -- such as money remittances from overseas Filipino workers that are sold to the banking system -- also helps to bolster the net foreign assets of the monetary system. An expansion in net domestic credits depends on demand for credit. With INQ7.net |
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