Cape Verde Money Supply Surges 12.5% on Foreign Asset Growth
Cape Verde’s money supply surged by 12.5% in June compared to the same period last year, a growth trend fueled largely by a significant influx of foreign assets, the Bank of Cape Verde (BCV) announced on Monday.
Foreign Assets Drive Economic Liquidity
The central bank revealed that net foreign assets jumped by 27.3%, anchored by a 33.9% rise in the BCV’s own external holdings. This growth pushed the nation’s net international reserves to 1,175.4 million euros as of June 30—a substantial increase of nearly 298 million euros over the past twelve months.
Domestic liquidity also saw a shift in composition. The total amount of money in the economy was bolstered by an 18% growth in currency in circulation and demand deposits. Additionally, “quasi-money”—which includes time and savings deposits—grew by 7.1%.
Private Sector Credit Rises as Government Borrowing Drops
While domestic credit saw a modest overall increase of 0.6%, the underlying data shows a diverging path between private and public spending. Credit to the private sector rose by 6.4%, signaling increased economic activity among businesses and individuals.
In contrast, net credit to the Public Administrative Sector (SPA) plummeted by 30.3%. This decline was driven by two factors: a 19% increase in government deposits held in banks and a sharp 86.7% reduction in the issuance of Treasury Bills, indicating less reliance on short-term domestic debt by the central government.
Lower Interest Rates for Borrowers
For consumers and businesses, the cost of borrowing trended downward. The average interest rate for bank credit, including overdrafts, fell to 8.43% in June—a decrease of 0.75 percentage points from the previous year. Meanwhile, savers saw a marginal gain as the average deposit rate ticked up slightly to 1.64%.
The monetary base, a key indicator of total currency in the system, expanded by 27.7%. This was primarily attributed to a 30.4% increase in bank deposits held at the central bank and a 15.8% rise in the issuance of physical currency.
Image: Pexels – Ryutaro Tsukata
