Monetary policy management an obsession that haunts economies

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Kuwaiti banks maintain comfortable growth rates

KUWAIT CITY, May 17: The process of managing monetary policy globally has become an obsession that haunts many major economies, since the start of the monetary tightening cycle in March 2022, the economic and geopolitical developments that central banks in the countries of the world anticipate are successive, each according to its location of events and the extent of its exposure to successive variables and its ability to deal with them, reports Al-Anba daily. Despite the passage of a year of the monetary tightening cycle, Kuwaiti banks maintained comfortable growth rates in the deposits and loans portfolios, and despite the decrease in the margins between the interest rates on deposits with banks for both the dinar and the dollar, they are still in favor of deposits in dinars, and the margins between the interest rate on the dinar and the US dollar allow the Central Bank the ability to maintain the stability of the exchange rate of the dinar and prevent any speculative operations that may occur.

Portfolios
Local banks continued to expand their balance sheets during March 2022 to March 2023, by increasing the loan and deposit portfolios, supported by the improvement in the operating environment in conjunction with the reopening of the economy on credit activity, and raising the discount rate (8 times since March 2022 by 250 basis points, to become at 4% currently to a lesser degree than the rate of raising regional and global central in order to devote monetary and financial stability and maintain the competitiveness of the currency. The national economy serves as a storehouse of local savings and promotes an atmosphere that supports sustainable economic growth, taking into account the economic conditions locally and globally, the geopolitical repercussions, and the directions of monetary policy in global economies.

data of the Central Bank of Kuwait’s monthly statistical bulletin for the month of March 2023 showed that the budget of local banks expanded to reach 85.4 billion dinars, with a growth rate of 6.8% at the end of March 2023, compared to a balance of 80 billion dinars at the end of March 2022. The deposits and loans portfolios of local banks witnessed growth, as dinar deposits (75.3% of total deposits) continued to grow by 6.1% to reach 35.8 billion dinars at the end of March 2023, compared to a growth rate of 5.6% to reach 33.7 billion dinars at the end of March 2022. The annual growth of loans slowed down to record 5.1% at the end of March 2023 to reach 47.2 billion dinars, to reflect the impact of the previous increases in discount rates, taking into account the period of slowdown.

Rates
The data also showed that the margins of interest rates on deposits remain in favor of the Kuwaiti dinar compared to deposits in US dollars, as the margins between the interest rate on the dinar and the US dollar still allow the central bank the ability to maintain the stability of the dinar exchange rate and prevent any speculative operations that may occur to take advantage of the price differences between the dollar and the dinar. In addition, deposits in dinars are still attractive under the umbrella of the Deposit Protection Law in light of the successive fears and crises experienced by global markets and banks.

Despite the decrease in the margins between interest rates on deposits with banks for both dinars and dollars, they are still in favor of deposits in dinars, as the interest margin between the dinar and dollars for one-month deposits reached 0.730 percentage points in March 2023, compared to 0.780 percentage points in March 2022. The margin for 3-month deposits reached 0.687 percentage points in March 2023, compared to 0.754 percentage points in March 2022.

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