AMENDMENTS TO LIQUIDITY MANAGEMENT

MBABANE – There is an amendment to the current domestic markets liquidity management framework and open market operations tools employed by the Central Bank of Eswatini (CBE).

This is as per a Notice shared on the CBE website. The effective date of the Notice is July 13, 2020. These   amendments seek to enhance the liquidity management operations of the CBE through a review of current instruments and an introduction of new operational tools. “The central bank is moving towards adopting a more active approach to domestic liquidity management with the ultimate objective  of  targeting  a  specific range for the level of excess  liquidity in the domestic market that  the CBE judges as consistent with  maintaining the Foreign exchange currency peg to the South African rand. “Also supporting this review is the advent of the Covid-19 pandemic, which made it necessary for the CBE to review some of the clauses in the Open Markets Operations tool kit to ease pressure on the banking sector  and  improve  liquidity  in  the  economy.

Impact

“The Bank will continuously monitor the impact and utilisation of the reviewed market operations and respond accordingly when deemed appropriate,” said Governor Majozi Sithole in the statement. According to the proposed amendments to the liquidity management and open market operations tools, the CBE will re-introduce and issue by auction on a weekly basis its own paper (CBE bills) to drain surplus liquidity from the market consistent with meeting the  its targets for excess reserves. The auctions will be conducted on Thursdays and market participants will be invited to offer cash to the bank on an auction basis. “CBE bills qualify as statutory liquid assets and will be available in tenors of seven, 14 and 30 or 31 days depending on the month.”

The bank will inform primary dealers (PDs) of the indicative auction volume and the distribution in terms of tenor a week earlier for their planning. The final details for each auction will be then published on Wednesdays each week before the auction the following day. The commencement date for the issuance of CBE bills will be August 6, 2020,” reads the statement in part.

Post your comment

Your name:

Your e-mail address:

Add your comments:

Please enter the code you see in the image:

Image:

Code: