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Minister of Finance and the Public Service, Dr Nigel Clarke, tables the 2021/2022 Estimates of Expenditure in the House of Representatives on February 18. (Photo: Donald De La Haye)

Bank of Jamaica modernisation paying dividends in a time of need, says Clarke

Minister of Finance and the Public Service, Dr Nigel Clarke, tables the 2021/2022 Estimates of Expenditure in the House of Representatives on February 18. (Photo: Donald De La Haye)

Government of Jamaica has been doubly hit by the COVID-19 pandemic which has reduced its revenues while spurring an increase in expenditures.

The Bank of Jamaica in downtown Kingston, Jamaica (Photo: Jamaica Observer)

However, Finance Minister Dr Nigel Clarke has managed to find a silver lining in this ordeal, revealing to Parliament on Thursday that some of the expenditure in the upcoming budget would be financed through a dividend of $33 billion to be paid by the Bank of Jamaica (BOJ) during the first week of April.

The Finance Minister said the dividend payment comes at a time when the nation is in great need and, is a direct result of the modernisation exercise undertaken by the central bank during the current administration’s first term.

“The reversal of fortunes resulted from the BOJ’s modernisation exercise, and the deliberate and calculated and determined shift in monetary policy towards inflation targeting, which began in earnest in 2018. And away from the previous policy, where exchange rate preoccupation, biased policy towards excessive interventions, which ultimately have a hidden and non-transparent fiscal cost,” said Clarke as he sought to explain how this dividend came about.

Minister of Finance and the Public Service, Dr Nigel Clarke, tables the 2021/2022 Estimates of Expenditure in the House of Representatives on February 18. (Photo: Donald De La Haye)

“ Madam speaker, I’ll remind you, by the way, that this policy shift also paved the way for 10 consecutive reductions in the policy interest rate all the way down to near zero at 0.5%, and the expansion in credit that came from that, ” added Clarke.

Clarke credited the policy shift with helping the BOJ to move from recording losses to turning a profit, which has now created a sizable dividend to be paid over to the government.

 The finance minister went on to add that such dividend payments by the central bank were the norm in advanced economies like the United States.

According to Clarke, the dividend payment will be used to support a $60 billion social and economic recovery programme, which will in part help the country to procure vaccines for 60 per cent of the population.