Following a contraction in March, broad money (M3) expanded by Lm1.9 million, or 0.1 per cent, in April, with its annual growth rate remaining stable at 4.2 per cent, the Central Bank said yesterday. Monetary growth was mainly driven by a rise in domestic credit, particularly to the non-bank private sector. A sharp rise in the net foreign assets of the banking system reflected an increase in the equity capital of a foreign-owned bank that had no impact on monetary aggregates.

Narrow money (M1) expanded by Lm7.6 million, or 0.5 per cent, in April fuelled mainly by an increase in deposits withdrawable on demand, which added Lm6.1 million as deposits denominated in Maltese lira rose. At the same time, currency in circulation grew by Lm1.6 million, or 0.3 per cent. Nonetheless, the annual growth rate of M1 was unchanged from the previous month at 4.3% in April.

The rise in M1 was substantially offset by a drop in deposits with an agreed maturity of up to two years amounting to Lm5.7 million, or 0.4 per cent, in April. This was mainly attributable to a contraction in Maltese lira denominated deposits held by private non-financial companies, which outweighed a rise in foreign currency deposits. Meanwhile, deposits redeemable at up to 3 months’ notice remained at the same level.

As regards the counterparts of M3, domestic credit rose by Lm2.1 million, or 0.1 per cent, in April, driving up the annual growth rate to 2.8 per cent, from 2.5 per cent in March. Claims on other residents went up by Lm10.0 million, or 0.4 per cent, driven almost entirely by loans to the non-bank private sector. In particular, lending to households – mostly intended for house purchases – to the ‘real estate, renting and business activities sector’ and to the construction sector increased. In contrast, net claims on central government contracted by Lm8.0 million, or 1.8 per cent, mainly on account of a drop in the amount of Treasury bills held by the Central Bank of Malta.

The net foreign assets of the banking system surged by Lm213.4 million, or 12.1 per cent, in April. As a result, their annual growth rate doubled to 24.7 per cent, from 12.4 per cent in the previous month. However, this rise was completely attributable to an injection of equity capital from abroad into one credit institution. In contrast, the net foreign assets of the Central Bank of Malta dipped by Lm17.2 million, or 2.0 per cent, mostly on account of foreign currency sales to deposit money banks. A large part of the latter reflected payments of dividends by subsidiaries of foreign owned companies operating in Malta.

The other counterparts of M3 expanded by Lm213.6 million, or 14.7 per cent, in April, due to the increase in share capital mentioned above.

Further economic and monetary information can be obtained from the website of the Central Bank of Malta www.centralbankmalta.com