Lower demand for commercial banks’ credit in March 2021

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During its meeting of May 18, 2021 and after reviewing the most recent economic and monetary data, the Monetary Policy Committee (MPC)[1] of the Centrale Bank van Aruba (CBA) decided to keep the reserve requirement at 7.0 percent. The reserve requirement refers to the minimum amount of reserves that commercial banks must hold at the CBA and is equal to 7.0 percent of their liabilities with a maturity less than 2 years. The following information and analysis were considered in reaching this decision.

International reserves

International reserves (including revaluation differences of gold and foreign exchange holdings), up to and including April 30, 2021, strengthened by Afl. 223.7 million to a level of Afl. 2,580.3 million compared to the end of December 2020. This expansion was primarily the result of the Dutch government liquidity support received by the government of Aruba, as well as higher inflows related to tourism services. Meanwhile, official reserves increased by Afl. 109.8 million. Consequently, the official and international reserves reached, respectively, Afl. 2,317.7 million and Afl. 2,580.3 million as of April 30, 2021. Accordingly, the level of reserves remained adequate when benchmarked against the current account payments and the IMF ARA[2] metric (Figure 1).

Credit developments

In March 2021, total credit contracted by Afl. 28.5 million/0.7 percent to Afl. 3,935.6 million, when compared to the end of 2020. This was driven by the categories ‘loans to individuals’ (-Afl. 21.1 million/-1.1 percent), ‘business loans’ (-Afl. 3.9 million/-0.3 percent), and ‘other’ (-Afl. 3.6 million/-0.7 percent). The category ‘loans to individuals’ was mostly influenced by a lower demand in consumer credit. Meanwhile, the component ‘business loans’ was for the most part negatively impacted by commercial mortgages.


The CPI was 1.1 percent lower in March 2021, compared to the corresponding month a year earlier (Figure 2). This was mainly attributed to lower prices in the categories ‘recreation and culture’ and ‘clothing and footwear’. The 12-month average inflation rate continued its downward trend reaching -2.3 percent in March 2021. When excluding energy and food, the 12-month average core inflation rate stood at -0.9 percent in March 2021, down from 0.1 percent in December 2020.

Prudential liquidity

The prudential liquidity ratio of the commercial banks (34.8 percent), which measures the amount of their liquid assets to their total net assets, remained at a comfortable level in March 2021, far above the minimum required prudential liquidity ratio (15.0 percent).

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