Reply to a letter by Mr Farrugia which appeared in the Times "Just three examples: (1) On our domestic financial system: “Its subset was partly funded... by short-term foreign lines.” How many readers are aware of what this is all about? (2) On this country’s external financial situation, as ‘skewed’ by the presence of internationally-oriented banks: “If we exclude these banks from our estimates, Malta appears to be in a net external liability position.” Not a word in explanation from the Central Bank, hopefully in disagreement. (3) On reinvested outflows: “Half of net income outflows have been reinvested through FDI in recent years, which is a substantially smaller proportion than in earlier years.” Prima facie, a worrying statement. And, yet, nothing forthcoming from Malta Enterprise. Let the citizens remain happy in their ignorance. Why distress them? Here are the replies (1) Given the fact that a number of "domestic" banks are subsidiaries of foreign parent banks, a certain element of parent-subsidiary interdependence is to be expected. (2) The size of international banks is so large that their operations dwarf the other financial transactions. Given the series of current account deficits, it is natural to hypothesise that the net external asset position is purely a statistical illusion. (3) This follows the relatively subdued private sector investment activity in recent years. timesofmalta/articles/view/20130727/letters/Financial-analysis.479673
Posted on: Sat, 27 Jul 2013 16:44:06 +0000
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