Business Advice

Government option for commercial recovery

Every time there is some economic turmoil in any country, the question that lingers in the minds of stakeholders is how long the situation will prevail. The situation can hold on as long as there is no cash that is readily available. For a full commercial recovery to take place, a government may opt to take from the domestic market or reduce the cash reserve ratios. Another way is for the government to lower the repo rates. This refers to the rate the main reserve bank of a country gives loans to the various commercial banks.

Reduction in the ratios of cash reserve enables commercial banks to retain more money compared to the amount they deposit in the government accounts. The step that is a no-no in the quest for commercial recovery is when a government may opt to more currency with the economy offering lesser corresponding products. Such a step will cause the slowing down of economic growth.