Namibia: Banks' Liquidity Continues to Shrink
Local commercial banks may be headed towards tough times as their overall liquidity position has been shrinking for over three months in 2018, standing at only N$1,1 billion in December.
This is roughly half the liquidity position recorded in November 2018, which stood at N$2.3 billion. The Bank of Namibia (BoN)'s money and banking statistics recent report revealed that the cash reserves of commercial banks have decreased from October 2018 throughout December 2018. Statistics indicate that the commercial banks' overall liquidity was N$4.7 billion in September 2018, but then declined to N$3.4 billion in October 2018.
The figure declined further to N$2.3 billion in November 2018, and then to N$1.1 billion in December 2018. According to the report, the decline in the overall liquidity position of commercial banks was mainly triggered by foreign currency outflows to trade-related payments.
In response to questions from The Namibian, the Central Bank's Deputy Director for corporate communications, Kazembire Zemburuka, said commercial banks with squeezed liquidity positions might experience difficulty in meeting their day-to-day funding obligations. He said because banks are required to pay for imported goods and services on behalf of their clients, their cash balances will decline.
Customers on the other hand, will be hindered from having the ability to have immediate access to their deposits placed with these commercial banks. However, it is important to note that the reported decline in banks' liquidity position is not alarmingly low, and that the BoN has standing facilities which provide collateralised funds to commercial banks when the need arises. Zemburuka added that high liquidity positions would enable commercial banks to extend credit, which may have a positive impact on the economy, provided that such loans are used productively.
Loans granted for the establishment of new businesses or the expansion of existing businesses are productive loans, the Deputy Director added. The expansions or establishment of new businesses may in turn, lead to the creation of new job opportunities, and contribute to economic output. Read more on All Africa.
Source: All Africa