Bank of Cabo Verde studies the application of reserves in Chinese currency and gold

3 October 2019

The Bank of Cabo Verde (BCV) is studying the application of part of its reserves in Chinese currency, Governor João Serra said while making statements in Praia, during the first reserve management meeting of the central banks of the Portuguese-speaking countries.

The governor justified his statement by the fact that Chinese assets are “yielding a little more, so we must seize that opportunity,” although he gave assurances that the Bank of Cabo Verde will remain “a conservative investor and not a speculative one,” according to the Lusa news agency.

The director of the institution’s Markets and Reserves Management Department said that the BCV has set up two investment portfolios in euros and dollars with much longer maturities than usual and is also considering applying part of the reserves in gold bars.

“There is an external environment with negative interest rates. I note the European central bank that is charging negative interest on deposit rates, so it is difficult to make investments with positive returns. We only find positive returns over a very long period of maturity, so there is an opportunity cost for having reserves,” she said.

Elsa Brito also said that Cabo Verde’s foreign reserves are estimated at 623 million euros, “sufficient liquidity to withstand shocks that may come from adverse economic cycles,” putting the country at a historical level in this regard.

The official said the reserves represent about six months of imports, which is important since Cabo Verde is a country with fixed exchange rate parity against the euro and with many external vulnerabilities, according to the Inforpress news agency. (Macauhub)