Downward movement in net international reserve

JAMAICA’S net international reserves (NIR) is going down, with the latest out-turn for January 2021 registering a decline of US$147.99 million to US$2.98 billion.

This is relative to the US$3.13 billion registered the month before at the end of December 2020. This change in the NIR resulted from a Us$147.64million decrease in foreign assets, which totalled US$3.93 billion compared to the US$4.08 billion reported for December 2020.

Currency and deposits contributed the greatest share of decline in foreign assets. Currency and deposits as at January 2021 totalled US$3.37 billion, reflecting a decrease of US$144.50 million compared to US$3.51 billion booked as at December 2020.

Securities amounted to US$341.54 million or US$3.22 million less than the US$344.76 million reported at December 2020. While special drawing rights and International Monetary Fund (IMF) reserve position amounted to US$224.62 million or US$0.08 million more than the US$224.54 million reported at December 2020.

BOJ’S LIABILITIES TO IMF INCHING UP

Liabilities to the IMF accounted for 100 per cent of total foreign liabilities, which amounted to US$955.31 million, which reflected a month on month increase of US$0.35 million in comparison to the US$954.95 million recorded for December 2020. At its current value, the NIR is US$111.45 million less than its total of US$3.09 billion reported at the end of January 2020.

At this current rate, the NIR is able to support approximately 50.23 weeks of goods imports and 36.14 weeks of goods and services imports. Jamaica came in above the benchmark of US$3.155 billion outlined by the IMF for March 2020, closing the fiscal year at US$3.24 billion or US$0.09 million above the targeted amount.

The NIR target outlined as per the new agreement for the 2020/21 fiscal year is US$3.485 billion.

JAMAICA CURRENTLY BELOW IMF TARGET

Based on this, as at January 2021, the country is US$0.51 million below the targeted amount. However, the Bank of Jamaica (BOJ) reports that its assessment proves that Jamaica’s international reserves remain buoyant.

According to the BOJ, “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 reflected increased holdings of Government of Jamaica securities, partly offset by higher central government deposits.

Additionally, demand for currency, which affects outflows, has been influenced in 2020 by the public’s desire to hold its assets in more liquid forms. Based on the BOJ’S assessment, as outlined in its most recent quarterly monetary policy report: “The financial system in Jamaica has remained resilient throughout the pandemic.”