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GAP-ROAR confused about excess liquidity

Mar 19, 2009 Letters

Dear Editor,
Member of Parliament Everall Franklin does not understand what high liquidity represents.
Franklin argues that “while a safe level of liquidity was necessary to have an excessive amount just sitting in a bank, it was indicative of lack of investment opportunities.”

Franklin contends that, “cash sitting in a bank does nothing for a country given that it is not being invested in projects, upgrading business among others which would also allow the cash to benefit the country and increase revenue base given that interest would have to be paid to the bank as the money borrowed is returned.”

The excessive liquidity has to do with the Commercial Banks and not the Central Bank. It should also be noted that Central Banks do not lend to individual persons but rather the Commercial Banks do that kind of thing.
The Bank of Guyana is responsible for mopping up any excessive liquidity through Treasury Bills.  This approach is intended to manage inflation and sustain the sound macroeconomic fundamentals of this country.
Elizabeth Daly

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