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Return to IMF now more likely
PM cites heavy demand for FX
BY ALICIA DUNKLEY, Observer staff reporter dunkleya@jamaicaobserver.com
Wednesday, June 10, 2009
Prime Minister Bruce Golding yesterday indicated that his administration may well enter into negotiations with the International Monetary Fund (IMF) to prevent Jamaica's Net International Reserves from buckling under the weight of demand for foreign exchange.
The prime minister, who was responding to questions posed in the Lower House by Central Kingston member of parliament Ronald 'Ronnie' Thwaites, said the possibility was more, given the significant fallout in foreign exchange flows emanating from the closure of three of the island's four bauxite plants, a major foreign exchange earner, in addition to a decrease in remittance inflows.
"A concern we have had is our ability to ensure an adequacy of foreign exchange to meet Jamaica's requirements through this year," Golding told Parliament. "We monitor almost on a daily basis, and for the past three months our reserves have held, but looking beyond March we can't be sanguine as to the ability of our existing and projected reserves to withstand the pressure of demand and therefore the possibility of seeking an appropriate IMF arrangement is something that continues to be on our radar."
Golding, however, said "no negotiations have commenced with the IMF because no applications have been submitted by the Government of Jamaica".
He said meetings with officials from the fund last week were used to discuss the facilities that would be available from the fund in the event that Jamaica needed to seek balance of payment support.
"We have a firm understanding as to the facilities that are available and the Ministry of Finance is to prepare a Cabinet note, which should be before Cabinet on June 22nd in the event we need to seek the intervention of the fund," the prime minister said.
He also said "budgetary support is one of the two lines the Government will be looking at in terms of making an application".
The NIR stabilised at US$1.62 billion at the end of March and increased to US$1.66 billion in April following over six consecutive months of decline.
At the end of May, the NIR was US$1.67 billion.
Last month, Minister without Portfolio in the Ministry of Finance Don Wehby described his recent meeting with the IMF in Washington as "exploratory", adding that it was geared towards sourcing alternative funding should the need arise.
Wehby said that as a direct benefit of the "exploratory meeting" with the IMF, the NIR could be boosted by US$300 million.
"The G7 have allocated quite a bit of money... we worked on the calculations and there is a strong possibility that Jamaica could benefit by US$300 million allocation to the Net Internal Reserves from the IMF, and that is without any formal programme because we are a member," Wehby said.
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