HAS THE CENTRAL BANK GOT SOMETHING TO HIDE?
This is the second consecutive year that the Central Bank has failed to publish its balance sheet for the month of January, as it is obligated to do by law. Instead it has jumped to February ignoring January completely.
The CBS has yet to publish its quarterly report for the last quarter of 2006 as well as its annual report for last year. Last year its annual report for 2005 was published before the last quarterly report for the year (putting the cart before the horse), painting a glowing picture of the economy for the election of Mr Michel.
Meanwhile, the IMF has not been authorised to publish the 2006 Article IV Consultation document, despite the widespread publicity given to a statement by the IMF staff before they left
A closer look at the December and February balance sheet shows that foreign exchange reserves dropped from US$ 110m to US$95 m between December and February. Current foreign currency reserves are worth just 8 weeks of imports, down one week since December.
The level of foreign exchange reserves is only 40% of the value of high powered money, a ratio economists targets to determine the sustainability of the official exchange rate. The latter has dropped by 10% for the US dollar since September last year, a move contrary to all other currencies around the world. In the same period the rupee exchange rate of the Euro dropped by 13%. The parallel movement of these two currencies indicates a gentle devaluation of the rupee. Since hotels are compelled to price their room rates in foreign currencies, the effect is negligible.
Meanwhile, the black market exchange rates are shadowing the official ones by the same margin. So far there is no indication of a convergence, which is unlikely to happen unless the money supply drops dramatically. Thus far it has dropped only by a meagre SR 58 million since September last year, despite a contraction of SR417m in domestic credit in that time. The sudden increase in bank reserves during February indicates that money supply has increased again rather than decrease. This coincides with the government reducing its rupee deposits with the Central Bank by SR 169 million while drawing down foreign exchange reserves by US$ 15 million.
There is nothing here to justify Francis Chang Leng taking a break to watch a couple of games of soccer all the way in