The monetary authority expects that by the end of the measure, some 13,000 new affordable homes will have been financed.
SANTO DOMINGO- As of March of this year, banks, associations, corporations and other companies dedicated to credit have channeled 18,238 million pesos from the releases of the legal reserve, of which 13,855 million were placed in loans for the acquisition of 6,293 new low-cost homes, with a term of up to five years and an interest rate not exceeding 9%.
This was established yesterday by the Central Bank of the Dominican Republic (BCRD), through its forum of articles, highlighting that the authorized amount of 21,424 million pesos has positively impacted the living conditions of families not usually served by the financial system.
It adds that the remaining 4.383 billion pesos were allocated to interim loans, with a two-year term and interest rates of up to 9%, to finance 53 construction projects for this type of low-cost housing. The monetary authority expects that by the end of the measure, some 13,000 new affordable homes will have been financed.
"Based on the foregoing, it can be stated that the liquidity measures adopted by the Monetary Board during 2023 have had a positive impact on the recovery of highly linked productive activity, greater access for vulnerable groups to low-cost housing units, as well as on the quality and growth of the banking system's assets," the document says.
Furthermore, it noted that, as of March 2024, the assets of the financial system grew by 17.1%, with a solvency of 16.1%, above the regulatory minimum of 10%.
Central Bank experts reported that financial institutions have disbursed 96% of the 205 billion pesos authorized by the Monetary Board as part of its liquidity expansion program to stimulate the economy, primarily channeled to the commerce, construction, manufacturing, agriculture, and export sectors. With this measure, accumulated economic growth for January and February reached 5.4%.
The information provides answers to opinion pieces and observations from Dominican analysts and economists who have questioned the effectiveness of the expansionary measure that the monetary entity has been implementing since June 2023.
In that context, the Department of Regulation and Financial Stability specified that many of the negative opinions are influenced by the electoral cycle leading up to the presidential elections next Sunday, May 19.
"Given the sensitive nature of this issue for the proper management of economic expectations, and considering that many opinions at this time are influenced by the electoral cycle, the Central Bank of the Dominican Republic (BCRD) presents to economic agents and the general public a document with clear explanations about the positive effects that monetary policy has had on the recovery of growth and the reduction of inflation in the post-pandemic period," it stated.
According to the forum of articles, the liquidity expansion program authorized by the Monetary Board in 2023 amounted to 205 billion pesos, placed by the BCRD to financial intermediation entities through a combination of release of legal reserve and the instrument known as the rapid liquidity facility (FLR).
Of the total approved by the Monetary Board, the financial sector has placed some 196 billion pesos at interest rates no higher than 9% per year, which has helped to support the transmission mechanism of monetary policy and encourage domestic credit, the report states.
"The flow of resources placed by the Central Bank of the Dominican Republic (BCRD) in the economy through financial entities was key in accelerating the growth of credit to the private sector in national currency, which went from an annual expansion of 13.6% in June 2023 to a growth of 21.3% in March 2024," it highlights.
They reported that, in absolute terms, since June 2023, financial intermediaries have placed some 260 billion pesos with companies and households, representing 76% of the increase in private credit in national currency, with the 196 billion coming from the release of resources from the Central Bank of the Dominican Republic (BCRD).
The document underlines that the influence of credit dynamism on the economy is "clearly" seen in the most recent report from the Central Bank of the Dominican Republic (BCRD) on the evolution of the monthly indicator of economic activity (IMAE), with an accumulated growth in January and February of this year of 5.4% year-on-year, also observing a gradual recovery of the Dominican economy since July 2023.
"This growth was also aided by the acceleration of public investment towards the end of 2023 and the beginning of 2024," the finance department indicates.
Credit grows
According to the forum of articles, from May 2023 to March of this year, 2024, outstanding loans in the financial system in national currency, that is, those whose interest and principal payments are up to date according to the terms assumed by the debtors, showed a growth of 17.7%, higher than the 12.6% observed for the same comparable time period in 2023.
"This has contributed to the Dominican financial system registering a delinquency rate of only 1.2% in its loan portfolio as of March 2024 and offsetting the maturity of loans granted with resources from liquidity measures adopted during the COVID-19 pandemic," the report reads.
Detailing the analysis by economic sector, the liquidity measures implemented by the monetary and financial authorities in 2023 were mainly directed to five productive sectors with an approximate amount of 166 billion pesos: Commerce, construction, manufacturing, agriculture and export.
