Last month the Central Bank?s current account for cash advances to financial institutions increased by more than 100 percent compared to the month of November, reports Hoy newspaper. In November, the balance for the account was RD$2.8 billion, rising to RD$5.6 billion in December. The variance between November and December represents the highest increase ever from one month to another, not only in quantity but also percentage-wise.
The Central Bank uses the cash advances account to support financial institutions that find themselves in ?special situations? (e.g. lack of liquidity). The Central Bank?s cash advances are akin to temporary ?inorganic? money, or rather money with no hard-currency banking. It can be compared to printing paper money without having any assets to back it up. Some bankers argue that the increase in the account is related to the lack of liquidity in the market owed to the current problem with the dollar. Since many financial institutions bought dollars before the ceiling of the exchange rate was established, paying prices between RD$23 ? 24 per dollar, they are unwilling to sell these dollars until buying and selling can be effected freely and without restriction.
