NASSAU, BAHAMS — Bank liquidity tightened in 2025 as excess reserves declined by $40.2 million, reversing the $18.2 million accumulation recorded in the previous year, a the Central Bank reported in its Monthly Economic and Financial Developments Report for December.
The contraction in excess reserves — a narrow but closely watched measure of bank liquidity — reflected increased deployment of funds into domestic credit rather than a drawdown in deposits, signalling more active lending and balance-sheet management across the banking sector.
Despite the reduction in idle reserves, overall liquidity conditions remained robust. Excess liquid assets, a broader measure that includes cash and near-cash instruments, expanded by $151.2 million during 2025, widening from the $75.9 million increase recorded a year earlier.
Liquidity pressures were more evident in December, when excess reserves declined by $104.0 million to $1.845 billion, although the contraction was milder than the $127.5 million reduction recorded in December 2024. Excess liquid assets also fell during the month, down $59.3 million to $3.111 billion, moderating from the $128.8 million decline in the same period last year.
Foreign currency flows also shifted during the month. Preliminary data showed that foreign currency sales for current payments increased by $116.1 million to $890.1 million compared to December 2024, driven mainly by higher factor income payments, increased credit and debit card transactions, and stronger transfer payments. These outflows were partially offset by reduced payments for oil imports, non-oil imports and travel expenses.
On a year-to-date basis, however, foreign currency sales for current account transactions declined by $269.8 million to $7.926 billion, reflecting lower outflows for factor income payments, oil imports and travel-related expenses, despite increases in card-related transactions, transfer payments and non-oil imports.
Domestic credit growth showed signs of moderation in December. Total Bahamian dollar credit expanded by $23.0 million, down sharply from $109.6 million a year earlier, as private sector credit growth slowed to $5.5 million. Commercial lending declined by $6.8 million, reversing a strong expansion in the same month of 2024, while consumer credit growth eased to $1.1 million.
In contrast, net mortgage lending strengthened to $11.2 million, while net claims on the Government rose by $17.4 million. Credit to public corporations edged up slightly during the month.
For the full year, total Bahamian dollar credit growth moderated to $398.1 million from $427.9 million in 2024. Private sector credit was largely steady at $290.8 million, though mortgage and consumer credit growth slowed, while commercial credit expansion firmed. Net claims on the Government increased further to $120.4 million, while credit to public corporations declined.
Foreign currency credit activity also improved in December, with growth rising to $10.0 million from $4.4 million a year earlier. On a year-to-date basis, foreign currency credit expanded by $19.9 million, reversing a contraction recorded in the previous year.
The Central Bank said the data indicate that while banks drew down excess reserves in 2025, the system remained financially sound, supported by stronger holdings of broader liquid assets and stable credit conditions.
