BOJ far advanced in being recapitalised to the tune of over $28 billion

The Bank of Jamaica (BOJ) is far advanced in being recapitalised by the Government of Jamaica (GOJ) to the tune of five to eight per cent of its monetary liabilities.

This would amount to about $28 billion, which would represent five per cent of monetary liabilities and gradually increasing to eight per cent or about $30 billion. This is being done as part of the menu of measures to make the BOJ, Jamaica’s central bank, truly independent.

The capitalisation would be effected by the GOJ issuing marketable securities to BOJ when the new provisions to the BOJ Act, is passed into law by Parliament.

BOJ Governor Richard Byles made the disclosure on Wednesday as he addressed the Jamaica Money Market Brokers (JMMB) Thought Leadership Breakfast at Courtyard Marriott in New Kingston.

He told business leaders that the new BOJ Act, which has already gone through a Joint Select Committee of Parliament, should be passed and in place by February next year.

According to Governor Byles, “recapitalisation of the BOJ will allow us to buy and sell securities and pursue independent market positions without asking the GOJ”.

He pointed to the restructuring now taking place to bring a greater level of independence to the BOJ, such as the removal of representatives of the Government from the board. He indicated that the positions on the BOJ board of financial secretary and Planning Institute of Jamaica director or his nominee would be replaced under the new Act with two independent people from civil society with the requisite expertise in business and finance.

He said the new-look BOJ would be equipped with two new committees, Financial and Regulatory, and Monetary Policy. The financial and regulatory committee, which would comprise four members, chaired by the governor and the senior deputy governor along with two independent members from civil society, will set policies governing the financial sector.

The four-member monetary policy committee, which will also be chaired by the governor and comprising the senior deputy governor and two independent members of society will meet every month to decide on the movement in benchmark interest rate.

Governor Byles indicated that the search for the two independent BOJ board members ought not to be limited to Jamaica but should include the Diaspora, as the individuals being sought should have international experience.

He pointed to the fact that under the new Act, the BOJ would be compelled to appear before Parliament every quarter, to be scrutinised on its stewardship of the financial sector.

JAMAICA LOSES US$1.8-BILLION LINE OF CREDIT

The BOJ governor disclosed that effective November 2, Jamaica will lose a US$1.8-billion line of credit, as a result of the successful end of its precautionary stand-by arrangement (PSBA) with the International Monetary Fund (IMF). He made the point that this money is no longer available to Jamaica, “so, come November 2, we are now on our own”.

However, “fiscally we are strong, surplus showing strong growth, economic growth is positive albeit anaemic….but we graduated from the IMF much better than we started”, the Governor boasted.

He commented, “Jamaica has been in 16 IMF arrangements and only graduated from three, so it means the rest of them, we have failed.”