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Demand for credit rises

Johannesburg - Credit extension to the private sector (PSCE) grew at a rate of 6.18% year-on-year (y/y) in April from 5.13% year-on-year (y/y) in March, the South African Reserve Bank (Sarb) said on Tuesday.

The rate of growth of South Africa's broad M3 money supply measure rose by 6.0% y/y in April from 6.53% y/y in March.

The rate of growth in PSCE was expected to have registered 5.6% y/y, according to a survey by I-Net Bridge and M3 was expected to have increased at 6.9% y/y.

South Africa's total domestic credit extension grew at a rate of 4.69% in April from 3.63% y/y in March.

Total loans and advances, which is PSCE excluding investments and bills discounted, recorded 6.03% y/y growth in April from 5.31% y/y growth in March.

The Sarb also indicated that its international liquidity position rose to $46.039bn in April from $44.725bn in March.

Overall credit was at 22.3% in June 2006 when interest rates were hiked that year. Money supply dipped below the crucial 20% mark in July 2008 for the first time since November 2005.

Rates were cut three times in 2010 to a 30-year low of 5.5% in an attempt to boost the economy. Credit numbers are an important indicator the central bank watches to determine demand signals.
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