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Dáil Éireann debate -
Tuesday, 17 Jul 1979

Vol. 315 No. 16

Written Answers. - Credit Squeeze.

80.

asked the Minister for Finance if he will ensure that the credit squeeze now applied by all lending institutions will not inhibit agricultural production and agricultural business.

In its monetary policy for 1979 the Central Bank has provided for an increase in bank lending to the private sector of 18 per cent. As the increase in personal lending has been limited to 10 per cent, there is scope for an increase of about 20 per cent in productive lending. Lending to the agricultural sector is included in the productive lending category to which the Central Bank has traditionally given priority in its lending advice to the banks.

The credit guideline was formulated with regard to national economic objectives including the promotion of a high and stable level of economic growth. The Central Bank was satisfied that an 18 per cent increase would be adequate to accommodate the reasonable demands of the private sector. Furthermore, in the context of our membership of the EMS, credit policy this year seeks to ensure that the growth in domestic credit will be consistent with the protection of the exchange rate and the maintenance of our external reserves at an adequate level.

The growth in bank credit to the private sector in recent months has, allowing for exceptional factors, been well above a trend consistent with the 18 per cent annual guideline appropriate for achievement of national economic objectives. I am advised by the Central Bank therefore that a significant moderation in the rate of expansion of total credit to the private sector, some 20 per cent of which is accounted for by lending to agriculture, will be required over the remainder of the year.

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