FINANCE Minister Colm Imbert says there is nothing unusual about the Central Bank's decision on July 19 to reduce the reserve requirement for commercial banks from 14 to ten per cent.
He made this comment on July 23 after former Central Bank deputy governor Dr Terrence Farrell raised a question about the decision and Oropouche West MP Davendranath Tancoo made related claims.
In a post on X (Twitter), Imbert said, "The Central Bank has reduced the reserve requirement for commercial banks, well within international norms, to facilitate credit to businesses and individuals. Because of confidence in the economy, credit has been growing at seven per cent per year but the naysayers see this as bad."
In the House of Representatives on June 7, Imbert said the International Monetary Fund 's (IMF) country report issued two days earlier indicated that the economy was at its strongest level in a decade.
In a WhatsApp reply sent to Newsday on July 23, the bank said, "We have no comment on the article (letter by Farrell)."
In a letter to the editor on July 22, Farrell asked whether the a decision by the bank to reduce the cash reserve requirement for commercial banks was to facilitate increased government borrowing from local banks.
Farrell said the decision to reduce the requirement for commercial banks by four percentage points releases almost $4 billion from the cash reserves.
"This marks a significant relaxation in monetary policy which is likely, other things being equal, to expand credit and increase the demand for foreign exchange when our foreign-exchange reserves are already under stress and, given the outlook for natural gas and petrochemicals exports, will remain stressed for the foreseeable future."
In a statement on July 23, Tancoo called on the bank and Imbert for an explanation.
He asked what commercial banks would do with the $4 billion Farrell mentioned in his letter.
"Is the government hiding some upcoming mega-investment plan (for which) they are hoping to entice commercial banks’ buy-in?”
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