Rise in Foreign Deposits Slightly Boosted Dollarisation Rate

During the week ending January 22, 2015, broad Money M3 experienced a downtick by LP 70B ($46.48M), to reach LP 176,251B ($116.92B) with a 5.33% year-on-year growth. Likewise, M1 decreased by LP 111B ($73.94M) due to the reduction in money in circulation by LP 132B ($87.56M) while demand deposits inched up by LP 21B ($13.93M).

Total deposits (excluding demand deposits) increased by LP 41.38B ($27.45M), given the progression of deposits denominated in foreign currencies by $50M. Meanwhile, term and saving deposits in domestic currency went down by LP 35B. Over the above mentioned period, the broad money dollarization rate improved from 58.52% the prior week to 58.59%. According to the Central Bank, the overnight interbank rate stood at 2.75% at the end of November 2014.

In the TBs auction held on the 22nd of January 2015, the Ministry of Finance raised LP 1,028B ($681.26M), through the issuance of bills maturing in 6M, and 2Y and 10Y notes. The highest demand was achieved on the 10Y notes that took a share of 89.58%, while the 6M bills and 2Y notes accounted for 5.58% and 4.84%, respectively. The 6M bills yielded 4.87%, while the average coupon rate for the 2Y and 10Y notes stood at 5.84% and 7.98%, respectively. New subscriptions exceeded maturing T-bills by LP 732.79B ($486.10M).

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