BOJ answers questions on the reservesSunday, September 12, 2021
1. How are the reserves held? For example, is it held at the Bank of Jamaica. If not, where are they held?
The country's international reserves are held in (i) deposits with foreign institutions such as the US Federal Reserve Bank of New York, the Bank for International Settlements, and global commercial banks with a minimum credit rating of A+ from a recognised credit rating agency, (ii) investments in US Treasury bonds, and (iii) investments managed by external fund managers such as the Bank for International Settlements, Crown Agents Investment Management and the World Bank.
2. In what currencies (value and volume) are our reserves held?
Given Jamaica's trade relations and foreign obligations, most of the reserves are held in US dollars – as at end of July 2021 approximately 93.1 per cent of the gross reserves were held in US$ denominated assets. The remainder was held in SDRs (6.1 per cent), CNY (0.5 per cent) GBP (0.2 per cent), and Canadian Dollars (0.1 per cent). Please note that at July 31, 2021 the country's gross international reserves were the equivalent of US$4.26 billion whilst its net international reserves were the equivalent of US$3.36 billion.
3. If the reserves are held outside Jamaica, how soon is a demand/withdrawal honoured?
A significant portion of the foreign reserves is held in liquid assets that can be withdrawn immediately on demand.
4. If the reserves are held outside Jamaica, what is the thinking behind doing so?
Reserves can only be deposited with institutions that have extremely low or no credit risk and are therefore able to honour its commitments to Bank of Jamaica whenever required. The bank's policy with regard to the management of reserves is one of safety first (ie preservation of capital). This approach is in keeping with international best practices with regard to international reserves management.
5. If the reserves are held outside Jamaica, what are the dangers that this may pose?
There is virtually no danger given the abnk's approach to reserve management noted above. Further, risk assessments are continuously undertaken and any risk is appropriately mitigated. It should be noted that Bank of Jamaica, in the management of Jamaica's international reserves, follows international best practices promoted by international financial institutions such as the IMF and the World Bank.
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