Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1696586274386.pdf (Vanuatu)
RESERVE BANK OF VANUATU FINANCIAL & ECONOMIC ANALYSIS: The news items covered in this publication do not necessarily imply any judgment by the Bank on the accuracy of the information or any endorsement or acceptance of such news Issue 287 July 2022 1. INTERNATIONAL DEVELOPMENTS 3.
FOREIGN RESERVE DEVELOPMENT The International Monetary Fund’s (IMF) July World Economic Outlook (WEO) made downward revisions in global growth to 3.2 percent for 2022 and 2.9 percent for 2023, which were lower by 0.4 percentage points (pp) and 0.7pp, respectively, from the April WEO.

The revisions were driven by lower growth estimates for both advanced economies, mainly the US and Euro area, and emerging markets and developing economies, mainly China.
Downside risks highlighted in the April WEO have materialized globally with continuing high inflation and tighter financial conditions with further negative cross- border effects from the Russia- Ukraine war.

International commodity prices fell in June but remain higher compared to a year ago.
Reductions were noted for most of Vanuatu’s trading commodity prices such as crude oil prices (-10.03 percent), sunflower oil (-17.38 percent), rice Thai (-6.57 percent), wheat (-16.77 percent), coconut oil (-9.40 percent), coffee (-3.3 percent), and cocoa (-3.58 percent).

2.

EXCHANGE RATES DEVELOPMENT Over the month of July, the Vatu depreciated against the AUD by 1.0 percent and NZD by 0.5 percent while it appreciated against the USD by 0.6 percent and the EURO by 3.0 percent.
Annually, the Vatu depreciated against the USD by 5.2 percent and it appreciated against the AUD, NZD, and the EURO by 0.3 percent, 4.8 percent, and 9.5 percent, respectively.

Foreign reserves increased slightly by 0.03 percent to VT71, 773.9 million over the month of June.

This level of reserves is sufficient to cover approximately 11 months of overall imports.

4.

DOMESTIC DEVELOPMENTS Domestic economic activity is gradually improving as reflected in partial indicators described below.
In terms of consumption activity, proxy indicators of VAT collections recorded a 12.6 percent increase over the month of June (+64.64 percent from June 2021).

Commercial banks’ lending to the private sector also recorded a 0.3 percent increase over the month (+1.6 percent increase from June 2021) but still at lower levels compared to pre-Covid period.
In terms of private sector investment, commercial banks’ lending to businesses increased by 0.2 percent over the month and 1.1 percent over the first six months of the year.

In addition, Vanuatu opened its international borders on 1st July 2022 since border lockdowns were imposed in March 2020.

The tourism industry is expected to experience positive changes with spill over effects onto other sectors, including overall domestic demand, from July 2022 onwards.
In terms of domestic price developments, partial indicators saw prices of imported diesel increasing by 18.6 percent to 217.12VT/litre in domestic fuel outlets in May.

As a consequence, Port Vila’s electricity tariff rose by 2.4 percent over the month of June to 63.80VT/kWh.

5.

MONETARY DEVELOPMENTS Money supply growth rose by 1.7 percent in June 2022, triggering annual growth to further increase by 9.6 percent.
The month-on-month growth was largely driven by domestic credit; in particular the increase in net claims on the central government and to a lesser extent the increase in net foreign assets (NFA).

The annual growth in M2 reflected the continuous accumulation of NFA and the improvement in domestic credit.

NFA rose by 0.8 percent and 12.0 percent in June and over the year to June 2022, respectively.

The month-on- 1 month upward trend reflected net inflows of foreign reserves recorded by commercial banks.
Furthermore, robust annual growth reflected continuous net inflows of foreign reserves via both the Reserve Bank (RBV) and Commercial Banks.

Institutions (OFIs) recorded negative growths of 3.1 percent month-on-month and 32.7 percent year-on-year, respectively to record VT702.1 million in June 2022.

Total loans extended by Commercial Banks to various sectors are depicted in table A4.
Chart 1: Determinants of Money Supply (y-o-y% Change) assets financial (deposits) The Central Governments’ net credit position vis-à-vis the banking system is determined by the movements in the Government’s and Governments financial liabilities (credit) with the banking system.

In June 2022, the Central Government’s net credit position with the banking system deteriorated; reflecting the effects of a decline in deposits and the increase in credit (bond holdings) with the Reserve Bank.
These factors the deterioration in Government’s net credit position with the banking system over the year to June 2022.

Claims on the Central Government by OFIs increased to VT5,000 million in June 2022 from VT4,700 million in May 2022, reflecting the issuance of new Government bonds in June 2022.
(mentioned above) contributed to Chart 3: Net Claims of the Vanuatu Government vis- à-vis the Banking Sector (BVT) Domestic credit continues to be driven mainly by the trend in the Governments net credit position vis-à-vis the banking system.

At the end of June 2022, domestic credit rose by 3.6 percent, reflecting the increase in net claims on the Central Government with the banking system.
Similarly, it rose by 4.3 percent over the year to June 2022, largely due to the increase in net claims on the Central Government, and to a lesser extent, slow private sector credit growth.

Chart 2: Private Sector Credit (y-o-y% Change) Open Market Operations (OMO) The Reserve Bank issued VT4,800 million worth of RBV notes in July compared to VT6,000 million issued in June 2022.

Total subscriptions received reached VT9,668 million compared to VT13,411 million received during the previous month.
Private Sector Credit (PSC) grew marginally by 0.2 percent and 1.0 percent in June 2022 and over the year to June 2022, respectively.

The slow growths recorded month-on-month and year-on-year, reflected increased credit extended to both individuals and households and businesses.
Loans extended by one of the Other Financial Allotments were made as follow: 7 days: VT700 million • 14 days: VT700 million • 28 days: VT770 million • 63 days: VT993 million • 91 days: VT950 million • 2 Chart 4: Outstanding RBV Notes (Levels, millions of Vatu, Month-End Data) Chart 5: Yield on 91-days RBV Note (Levels, Percentage, Month-end Position) A total of VT3,880 million worth of RBV notes matured in July leaving outstanding notes at VT6,437 million, compared to VT6, 237 million as reported in June 2022.
Yields of RBV Notes Yields on RBV Notes as of end July 2022: Term End July.22 End June.22 7 days 0.38% 0.38% 14 days: 0.35% 0.35% 28 days: 0.45% 0.30% 63 days: 0.34% 0.34% 91 days: 0.35% 0.35% 3 04008001,2001,6002,0002,4002,8003,2003,6004,0004,4004,8005,2005,6006,0006,4006,8007,2007,60004008001,2001,6002,0002,4002,8003,2003,6004,0004,4004,8005,2005,6006,0006,4006,8007,2007,600Jul-21Oct-21Jan-22Apr-22Jul-22RBV Notes OutstandingM vtM vtSource: RBV01234560123456Jul-21Oct-21Jan-22Apr-22Jul-2291 daysRediscount%%Source: RBV 4 TABLE A1 : BALANCE SHEET OF THE RESERVE BANK OF VANUATU (In Millions VT)1 Month3 Months12 MonthsClaims on nonresidents66,593.975,683.575,777.575,732.9-0.10.113.7Monetary gold and SDR holdings879.73,987.84,024.53,959.0-1.6-0.7350.0Reserve Assets65,714.271,695.771,753.071,773.90.00.19.2Currency and Deposits34.327.531.115.3-50.8-44.3-55.3National currency34.327.531.115.3-50.8-44.3-55.3Securities other than shares2,213.22,323.92,623.93,323.026.643.050.1Central government2,213.22,323.92,623.93,323.026.643.050.1Loans162.3229.9254.3249.4-1.98.553.7Other depository corporationsOther financial corporationsCental governmentOther residents sectors162.3229.9254.3249.4-1.98.553.7Other accounts receivable4,375.94,142.64,236.44,188.5-1.11.1-4.3Trade credit and advances95.1113.798.0108.810.9-4.314.3Settlement accounts352.1122.7237.7194.5-18.258.5-44.8O/W Items in the process of collection130.45.691.938.8-57.8593.1-70.2Miscellaneous Assets3,928.73,906.13,900.63,885.2-0.4-0.5-1.1Nonfinancial
assets1,730.71,752.51,751.31,752.30.10.01.2TOTAL ASSETS75,110.384,159.984,674.585,261.50.71.313.5Monetary Base47,776.757,429.754,600.855,073.80.9-4.115.3Currency in Circulation10,156.710,991.011,752.812,054.22.69.718.7Currency Other Depository Corporations ( Commecial banks cash)2,732.63,162.72,714.73,137.315.6-0.814.8Liabilities to Other Depository Corporations 34,887.443,276.040,133.339,882.4-0.6-7.814.3 Reserve Deposits 4,077.64,364.14,402.44,368.1-0.80.17.1 Other
 Liablities30,809.838,911.935,730.935,514.3-0.6-8.715.3Liabilities to Central Government14,086.113,122.514,089.713,340.8-5.31.7-5.3Deposits14,086.113,122.514,089.713,340.8-5.31.7-5.3OtherLiabilities to non residents1,588.21,454.41,460.71,346.3-7.8-7.4-15.2Deposits1,588.21,454.41,460.71,346.3-7.8-7.4-15.2DepositsOther DepositsSecurities other than shares4,512.52,807.75,227.16,233.119.2122.038.1Other Depository Corporation4,512.52,807.75,227.16,233.119.2122.038.1Other financial CorporationLoans3.80.00.00.0-100.0Liabilities to the IMF- Central Government 3.80.00.00.0-100.0Other accounts payable423.7432.6500.5500.20.015.618.1Trade credit and advances386.1401.6419.1416.9-0.53.88.0Other Sectors37.631.181.383.32.4168.0121.6o/w Settlement Accounts3.03.349.967.735.61,954.82,122.1Shares and other equity4,367.83,363.23,193.13,083.7-3.4-8.3-29.4SDR Allocation2,351.55,549.95,602.65,683.51.42.4141.7TOTAL LIABILITIES75,110.384,159.984,674.585,261.50.71.313.5May-22Mar-22 End of Period%ChangeJun-21Jun-22 5 TABLE A2a : BALANCE SHEET OF OTHER DEPOSITORY CORPORATIONS IN VANUATU (In Millions VT)1 Month3 Months12 MonthsDomestic currencyMonetary gold and SDRDeposits with RBVCurrency and deposits55,270.664,578.160,860.862,229.82.2-3.612.6Currency3,431.43,792.63,346.23,819.914.20.711.3National2,732.63,162.72,714.73,137.315.6-0.814.8Foreign698.7629.9631.5682.78.18.4-2.3Transferable deposits39,621.646,486.342,988.543,691.11.6-6.010.3In Local
Local currency:34,860.243,149.239,932.539,699.1-0.6-8.013.9Central Bank34,853.743,147.139,924.939,690.8-0.6-8.013.9Other depository corporations0.00.00.00.0Other financial corporationNonresidents6.52.27.68.39.6281.827.3Head offices and Branches0.00.00.00.0 Other depository corporations6.52.27.68.39.6281.827.3In foreign currency: 4,761.43,337.13,056.03,992.030.619.6-16.2Other depository corporationsOther financial corporationOther depository corporations26.40.40.00.0-100.0-100.0Nonresidents4,735.13,336.73,056.03,992.030.619.6-15.7Head offices and
offices and Branches1,438.9616.7783.11,049.434.070.2-27.1 Other depository corporations3,296.12,720.02,272.92,942.629.58.2-10.7Other deposits 12,217.614,299.214,526.114,718.81.32.920.5In Local currency: Other depository corporations209.3146.5146.5146.50.00.0-30.0Other financial corporationNonresidents2.00.00.00.0Head offices and Branches Other depository corporations2.00.00.00.0In foreign currency: Other depository corporationsOther financial corporationOther depository corporations890.51,052.51,077.81,101.92.24.723.7Nonresidents11,115.713,100.213,301.813,470.41.32.821.2Head offices and Branches0.00.00.00.0 Other depository corporations11,115.713,100.213,301.813,470.41.32.821.2Securities other than shares4,612.53,807.76,227.17,233.116.290.056.8Central Bank4,512.52,807.75,227.16,233.119.2122.038.1Central Government100.01,000.01,000.01,000.00.00.0900.0Loans61,198.862,173.861,721.761,832.10.2-0.51.0Central bank0.00.02.50.0-100.0Other depository corporations0.00.10.00.0-100.0Other financial corporations111.3229.5227.3211.3-7.0-7.989.9Central government398.5393.4399.5394.0-1.40.2-1.1State and local government32.628.729.230.23.45.2-7.2Public nonfinancial corporations1,083.91,184.51,163.81,111.9-4.5-6.12.6Other nonfinancial corporations26,443.826,849.026,422.026,499.10.3-1.30.2Other residents sectors32,566.432,889.232,882.832,997.90.40.31.3Nonresidents562.3599.5594.6587.6-1.2-2.04.5Interbank Funds sold0.00.00.00.0Shares and Other Equity0.00.00.00.0Other depository corporations0.00.00.00.0Other accounts receivable
 5,387.75,192.75,411.85,273.5-2.61.6-2.1Trade credit and advances115.3204.9167.0185.311.0-9.660.7Settlement accounts2,994.53,326.83,436.03,497.61.85.116.8Miscellaneous assets items2,277.91,661.01,808.81,590.6-12.1-4.2-30.2Nonfinancial assets6,151.46,265.86,308.16,334.90.41.13.0TOTAL ASSETS132,620.9142,018.1140,529.4142,903.41.70.67.8May-22Mar-22 END OF PERIOD%ChangeJun-21Jun-22 6 TABLE A2b : CONDENSED BALANCE SHEET OF OTHER DEPOSITORY CORPORATIONS IN VANUATU ( In Millions VT)1 Month3 Months12
 MonthsDeposits100,307.3107,593.9106,321.4107,633.01.20.07.3Transferable deposits66,263.973,754.174,075.675,374.51.82.213.7In Local currency: 46,563.052,010.352,432.153,195.91.52.314.2Central Bank 0.40.40.30.461.30.5-0.7Other depository corporation516.6488.3370.9375.11.1-23.2-27.4Other financial corporations2,727.33,326.03,226.83,953.522.518.945.0Central government1,408.33,510.83,261.93,176.2-2.6-9.5125.5State and local governments1,856.0180.2195.8282.744.456.9-84.8Public nonfinancial corporations331.7191.1371.3359.6-3.288.28.4Other non financial corporations18,850.920,443.920,519.120,454.9-0.30.18.5Other residents sectors21,002.123,875.124,577.924,632.40.23.217.3Non-residents1,838.81,976.71,976.71,952.7-1.2-1.26.2Head office and BranchesOther Depository and financial corporations12.617.623.511.8-49.9-33.0-6.5Other non residents1,826.21,959.11,953.21,940.9-0.6-0.96.3In Foreign currency: 16,031.718,701.318,274.819,053.94.31.918.9Other depository corporation68.847.546.645.5-2.3-4.3-33.8Other financial corporations619.4694.4639.5665.14.0-4.27.4Central government540.9963.0721.9856.418.6-11.158.3State and local governmentsPublic nonfinancial corporations60.1203.7102.0105.33.3-48.375.2Other non financial corporations10,015.311,528.111,417.911,945.34.63.619.3Other residents sectors3,224.33,384.63,580.23,491.8-2.53.28.3Non-residents1,830.41,066.01,392.01,172.0-15.89.9-36.0Head office and Branches0.02.4302.613.6-95.5455.6Other Depository and financial
 corporations2.62.82.82.80.01.310.9Other non residents1,827.91,060.71,086.51,155.66.48.9-36.8Other deposits 34,043.433,839.832,245.832,258.50.0-4.7-5.2In Local currency: 18,639.519,413.317,749.017,898.80.8-7.8-4.0Central bank0.030.030.030.030.00.00.0Other depository corporation690.3695.7696.7697.40.10.21.0Other financial corporations1,749.71,552.9686.8712.63.8-54.1-59.3Central government5,487.65,567.55,053.55,053.50.0-9.2-7.9State and local governments68.150.747.948.00.1-5.4-29.5Public nonfinancial
nonfinancial corporations266.6378.5378.6378.60.00.042.0Other non financial corporations2,714.52,737.42,609.02,720.34.3-0.60.2Other residents sectors7,662.88,430.48,276.58,288.40.1-1.78.2Non-residents1,465.6434.9473.8473.5-0.18.9-67.7Head office and Branches0.00.00.00.0Other Depository and financial corporations0.00.00.00.0Other non residents1,465.6434.9473.8473.5-0.18.9-67.7In Foreign currency: 13,279.213,507.813,543.813,433.1-0.8-0.61.2Other depository corporation0.00.00.00.0Other financial corporations2,365.02,134.42,184.72,167.3-0.81.5-8.4Central governmentState and local governmentsCentral government927.5939.1966.3994.82.95.97.3Public nonfinancial corporations69.670.472.574.62.96.17.3Other non financial corporations6,093.65,254.65,216.65,183.7-0.6-1.4-14.9Other residents sectors3,823.55,109.35,103.65,012.7-1.8-1.931.1Non-residents659.1483.9479.1453.1-5.4-6.3-31.2Head office and BranchesOther Depository and financial corporations0.00.00.00.0Other non residents659.1483.9479.1453.1-5.4-6.3-31.2Loans1,292.71,480.81,302.02,113.262.342.763.5Central bankOther depository Corporations889.21,053.51,077.11,101.22.24.523.8Other financial corporationsCentral governmentNon residents403.5427.4224.81,012.0350.1136.8150.8Head office and Branches375.1404.7195.41,000.4412.1147.2166.7Other financial corporations28.422.729.511.6-60.8-49.0-59.3Other non residentsInterbank Funds PurchasedOther accounts payable13,802.313,910.314,310.714,393.30.63.54.3Trade credit and advances142.4212.1158.3148.5-6.2-30.04.3Settlement
accounts2,851.43,155.23,200.33,269.12.23.614.7Provisions for losses3,393.23,151.73,059.73,051.0-0.3-3.2-10.1Accumulated depreciation3,669.44,023.14,080.64,085.50.11.611.3Dividends payable205.3302.7302.7302.70.00.047.4Miscellaneous liability items3,540.63,065.63,509.13,536.50.815.4-0.1Shares and other equity17,218.519,033.018,595.318,763.90.9-1.49.0TOTAL LIABILITIES132,620.9142,018.1140,529.4142,903.41.70.67.8May-22Mar-22 END OF PERIODJun-21%ChangeJun-22 7 TABLE A3 : DEPOSITORY CORPORATION SURVEY (In Million VT)1 Month3
 Months12 Months1.
Net Foreign Assets73,577.181,959.081,759.282,380.80.80.512.0Monetary Authorities (Net)62,654.268,679.368,714.268,703.10.00.09.7Other Depository Corporations (Net)10,922.913,279.713,045.013,677.74.93.025.22.
Net Domestic Claims22,728.821,684.221,989.723,174.15.46.92.0(a) Domestic Claims40,661.641,025.140,909.442,395.23.63.34.3(i) Net claims on central government-19,738.7-20,385.6-20,069.9-18,704.76.88.25.2Monetary Authorities-11,872.9-10,798.6-11,465.8-10,017.812.67.215.6Other Depository Corporations -7,865.8-9,587.0-8,604.1-8,686.9-1.09.4-10.4(ii) Claims on other Sectors60,400.261,410.760,979.361,099.90.2-0.51.2Other Financial Corporations 111.3229.5227.3211.3-7.0-7.989.9State and local government32.628.729.230.23.45.2-7.2Public nonfinancial corporations1,083.91,184.51,163.81,111.9-4.5-6.12.6Other nonfinancial corporations26,443.826,849.026,422.026,499.10.3-1.30.2Other residents sectors32,728.633,119.133,137.033,247.40.30.41.6(b) Other items (net)-17,932.8-19,340.9-18,919.7-19,221.11.6-0.67.23.
Broad Money (M2)96,305.9103,643.2103,748.9105,554.91.71.89.6(a) Money (M1)70,802.377,228.878,476.080,271.42.33.913.4 (i) Currency in circulation10,156.710,991.011,752.812,054.22.69.718.7 (ii) Transferable deposits60,645.666,237.866,723.168,217.22.23.012.5(b) Quasi-money25,503.626,414.425,272.925,283.50.0-4.3-0.9 Other Deposits25,503.626,414.425,272.925,283.50.0-4.3-0.9May-22%ChangeJun-21Mar-22Jun-22 END OF PERIODTable A4: Other Depository Corporations Sectoral Distribution of Loans and Advances in Vatu and Foreign Currency (In Million VT)Jun-21VTFCTotalVTFCTotalVTFCTotalDepository Institutions Domestic0.00.00.00.00.00.0Other Financial Corporations Domestic55.855.5111.3211.30.0211.3278.8-100.089.9Central Government398.50.0398.5394.00.0394.0-1.1-1.1Provincial Assemblies & Local Government32.60.032.630.20.030.2-7.2-7.2Statutory Non-financial Corporations Domestic681.4402.51,083.9697.4414.51,111.92.43.02.6 Manufacturing1,095.0199.91,294.91,252.6237.21,489.814.418.715.1 Agriculture984.255.81,040.01,064.448.71,113.18.2-12.67.0Public Utilities21.647.869.40.626.927.5-97.0-43.8-60.3Forestry0.396.096.30.0139.4139.4-97.345.244.7 Fisheries4.90.04.92.00.02.0-59.0-59.0Mining & Quarrying89.50.089.580.10.080.1-10.51,350.0-10.5Construction2,334.61,239.13,573.72,445.51,040.43,485.94.7-16.0-2.5Distribution (Wholesale and
(Wholesale and Retail)4,192.51,367.35,559.83,808.31,459.25,267.6-9.26.7-5.3Tourism2,027.95,622.67,650.52,402.65,797.08,199.618.53.17.2Transport664.1185.2849.3886.5274.71,161.233.548.336.7Communications742.20.0742.2446.30.0446.3-39.9-39.9Entertainment & Catering232.8174.5407.4265.7160.0425.714.1-8.34.5Professional & Other Services2,969.82,096.25,066.03,057.01,603.84,660.82.9-23.5-8.0Housing & Land Purchases13,676.32,538.116,214.314,477.82,595.917,073.75.92.35.3Other individual13,217.52,877.116,094.613,509.52,157.415,666.92.2-25.0-2.7Non Profit Institutions Serving Households257.40.0257.4257.30.0257.30.0750.00.0 Grand Total 43,678.916,957.660,636.545,289.315,955.261,244.53.7-5.91.0* As of October 2018 data includes Wanfuteng Bank*SECTORJun-22YOY % Change