IMF negotiations pressure J$

Bank of Jamaica governor Brian Wynter said the ongoing negotiations between the government and the International Fund has contributed to speeding up the depreciation of the Jamaican dollar against the United States dollar.

At the same time, Wynter said the above average decline in the value of the currency during the October to December 2012 quarter reflected excess demand for foreign exchange.

For the quarter, the local currency lost 3.3 per cent of its value compared to a depreciation of 1.4 per cent for the September 2012 quarter, and an average decrease of 2.1 per cent for the corresponding five December quarters.

The Jamaican currency traded at J$96.63 to US$1 last Friday.

For calendar year 2012, the Jamaica dollar depreciated by 6.9 per cent against the US dollar compared with a depreciation of 0.9 per cent for the year 2011.

But despite the quickening of depreciation and concerns about the trajectory of the Bank's net international reserves, Wynter remains adamant that the level is adequate.

He told the quarterly press briefing on monetary policy at Nethersole Place, downtown Kingston today that the gross reserves amounted to US$1.98 billion, representing 13.2 weeks of projected imports of goods and services.

However, he said the net international reserves fell by US$131.7 million to US$1.13 billion during the review quarter.

Headline inflation for the October to December quarter was 2.6 per cent. Wynter said that is projected to be within the range of 2 to 3 per cent for the March quarter.

This is due largely to expected moderation from persistent weak domestic demand and the tight fiscal stance now being undertaken by the Government.

The inflation forecast for fiscal year 2012/2013 remains unchanged in the range of 7.5 per cent to 9.5 per cent, the governor said.

However, some inflationary impulses are expected to emanate from imported prices such as oil as well as upward adjustments in the domestic economy to service fees and contracts such as rent, he said.

sabrina.gordon@gleanerjm.com