Financial system remains strong – Minister

KINGSTON, Jamaica: Minister of Finance and the Public Service, Audley Shaw, has announced that Jamaica’s financial system remains strong and well capitalized.

Shaw, who was opening the budget debate in the House of Representatives last week, commended the steps taken by the Bank of Jamaica earlier this year to stabilize the financial system, noting that they were successful.

“The foreign exchange market was subjected to considerable pressures in the 2008/09 financial year, particularly in the last two quarters of the year,” he said. “These pressures were mainly related to the acceleration of the international financial crisis. Against this background, the weighted average selling rate of the Jamaica dollar depreciated vis-à-vis the United States dollar by approximately 20 per cent for the fiscal year.”

Shaw said that the strategic actions taken by the bank included “establishing a special loan facility for securities dealers and deposit taking institutions with U.S. dollar liquidity needs and establishing an intermediation facility in both foreign and local currency, to enhance the flow of credit in the system.”

He said that at the end of March 2009, the Net International Reserves (NIR) stood at US$1.6 billion representing some 12 weeks of imports.

“The NIR declined by US$105 million during the 2008 calendar year.

“Meanwhile, the economy contracted by 0.6 per cent in 2008 in contrast to growth of 1.2 per cent in 2007. The main industries that contracted were agriculture, forestry and fishing, manufacture, construction and transport, storage and communication, while growth was recorded in finance and insurance services, wholesale and retail, and hotels and restaurants.

“The reduction in Gross Domestic Product (GDP) growth was principally a result of the global economic slowdown,” Shaw said.

He also said that inflation for the fiscal year 2008/09 was 12.4 per cent, which, although higher than the targeted nine per cent to 10 per cent, was significantly lower than the 19.9 per cent for the 2007/08 financial year.

Factors affecting inflation for the fiscal year included increases in international commodity prices, supply shocks from adverse weather conditions, and a depreciation in the exchange rate over the last two quarters, he said.

The finance minister also said that the current account deficit for the financial year 2008/09 was 19.2 per cent of Gross Domestic Product (GDP).

“This represents a deterioration of 3.9 percentage points over the previous year. This deterioration was influenced principally by sharp increases in the values of fuel and food imports in the first half of the year,” Shaw said. (JIS)

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