The report highlighted that the required reserves ratio also reduced from 15 to 13% providing additional liquidity to banks, indicating this helped the average yield on government papers to decline from around 4.86% at the end of 2019 to 2.67 percent at the end-2021.
"Private sector credit remained flat in 2020 but it has been recovering. Credit volume is expected to surpass the pre-pandemic trend at end-2022. CBG is tightening the monetary policy stance (2022Q2 MPC) in response to rising inflationary pressures and recovery in credit growth. MPC increased the policy rate by 100 basis points to 11%."
In the external sector, the report stated that the current account widened in 2021 after a contraction in 2020 mirroring the movement in imports. It added that slow tourist arrivals lowered service exports but strong remittance inflow helped support the accumulation of a strong reserve that was amplified by the US$85 million SDR allocation in August-2021.
"Exchange rates remained broadly stable during the pandemic with some recent depreciation against the Dollars associated with some appreciation against the Euro and the Pound as the Dollar strengthens globally. Soaring food & energy prices linked to the Ukraine war will put additional pressure on the current account and on international reserves that have slightly declined in recent months."
The report continued that the current account is projected to remain high in the medium term to accommodate recovery-induced imports and high commodity prices.