An aerial view of New Kingston, Jamaica. (Photo: wikicommons)

Jamaica’s net international reserves levels buoyant, says central bank

An aerial view of New Kingston, Jamaica. (Photo: wikicommons)

The Bank of Jamaica (BOJ) had US$2.96 billion in net international reserves, an amount which represents 51. 99 weeks of goods imports, as at November 30.

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

The central bank’s total foreign assets as at November 30 were US$3.93 billion which is US$72 million more than October 2020.

Liabilities at November month-end comprised US$969.56 million for the International Monetary Fund, up US$3.25 million over October.

It is the Bank’s assessment that Jamaica’s international reserves remain buoyant, with gross reserves at end-October amounting to approximately US$3.9 billion, and representing 116.2 per cent of the Assessing Reserve Adequacy metric for FY2020/21.

The Government of Jamaica is targeting NIR levels of $2.4 billion at fiscal year-end March 2021.

Changes in the in the NIR stock is driven by outflows from Government of Jamaica, as well as net B-FXITT sales which is the sale of foreign exchange to major dealers.

Outflows from the NIR are largely offset by net purchases via the public sector entities (PSE) facility. An increase in net claims on the PSE largely reflected increased holdings of GOJ securities, partly offset by higher Central Government deposits.

Demand for currency, which affects outflows, has been influenced in 2020 by the public’s desire to hold its assets in more liquid forms in the context of the uncertainties surrounding the COVID-19 pandemic.

It is the BOJ’s assessment, as outlined in its most recent Quarterly Monetary Policy Report (QMPR), that the he financial system in Jamaica has remained generally resilient throughout the pandemic.

Both the primary ratio and capital adequacy ratio, which measures the capacity of banks to absorb unexpected losses, remained comfortably above their respective statutory minima. All banks have also remained very liquid, reporting Liquidity Coverage Ratios in excess of 100 per cent at end-September.

The Bank nevertheless notes that the pandemic continues to affect activity in the domestic banking sector and overall financing in Jamaica.

Private sector credit provided by DTIs however grew at a slower pace year over year, related to declines in financing to individuals and households.

Since the start of the pandemic, the Bank has implemented a number of initiatives aimed at supporting JMD liquidity including reducing the J$ cash reserve requirement, implementing a GOJ-BOJ bond-buying programme, reactivating the BOJ Intermediation Facility, a special Repo facility for Credit Unions and also the Occasional Term Repurchase Operation.

At end-October 2020, total JMD liquidity support provided by the bank since the start of the pandemic is in excess of J$76.0 billion.