NASSAU, BAHAMAS — The Central Bank’s external reserves increased by approximately $140 million to $2.6 billion in 2022 the regulator revealed yesterday.
Central Bank Governor John Rolle during a quarterly press briefing noted that the external balances are still very close to this level, just ahead of the anticipated seasonal build-up that is expected through the first half of the year.
“It is likely that as domestic demand further picks up, and commercial bank lending increases marginally in relation to 2022, the external reserves will close out 2023 at a stable to slightly decreased position from their present levels. This continues to be a healthy assessment for the reserves, which is also in keeping with anticipated further rebuilding from Hurricane Dorian, and use of re-insurance proceeds that are still inside the reserves,” said Rolle.
Rolle noted that the foreign exchange markets continue to provide more quantifiable, real-time indicators of the country’s recovery. “On the inflow side, commercial banks’ total foreign currency purchases from the private sector rose by approximately one-third to $7.2 billion in 2022, propelled by both tourism and foreign investment receipts. In the meantime, as private sector demand strengthened, commercial banks’ sales of foreign exchange to accommodate international payments increased by almost 30 percent, to approximately $7 billion. Since private sector inflows were stronger than the outflows, there was a corresponding reversal in commercial banks’ transactions with the Central Bank, favoring a net inflow to the external reserves in 2022.”
Rolle noted that because of the shift in the timing of the Government’s external bond issue from the second half of 2021 to the first half of 2022, the public sector transactions also netted a significant uplift to the external reserves—that is before the SDR transaction was taken into account.
Referring to the banking sector, Rolle noted that the environment also continued to feature rising liquidity, as deposit base growth, fuelled by converted proceeds from foreign exchange inflows, contrasted with a further reduction in credit to the private sector.
“While the economy has improved the debt servicing capacity of many existing borrowers, it has not yet resulted in any meaningful increase in the qualified pool of new borrowers, either for consumer loans, mortgages, or enterprise lending,” he said.
“As to credit risks, at the end of 2022, the average delinquency rate on private credit had fallen back below eight percent, which was also slightly below the non-performing loans rate that was also trending lower just before the pandemic’s interruption. The Central Bank expects this improvement to continue over the medium term. In the meantime, commercial banks’ lending is expected to increase incrementally in 2023, although this is still dependent on the characteristic of new potential borrowers who are entering the job market, as those gaining posts in tourism are considered riskier prospects,” said Rolle.
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