Aug 2010 Financial News

Jamaican economy right on track – Shaw

Aug 13, 2010

FINANCE minister Audley Shaw on Wednesday delivered a glowing report card on Jamaica's economy which he said was in a stable condition with most of the macro economic targets being achieved as outlined in the letter of intent to the International Monetary Fund (IMF).

Shaw also expressed confidence that the IMF team due to arrive here next week, will give Jamaica a passing grade for the second quarter which ended in June.

He also expressed optimism about Jamaica passing the third IMF test in September.

"We are confident that review will result in positive outcomes for that (June) quarter and we are pretty confident also about the performance through to the end of September," he told journalists at yesterday's weekly post cabinet press briefing at Jamaica House in Kingston.

Shaw noted also that the Net International Reserves continue to be healthy at over US$400 million above the target of what was anticipated within the context of the letter of intent. Now standing at US$1.76 billion, Shaw said that it is expected that the collection of US$200 million from Inter-American Development Bank (IDB) later this week will further increase it.

"But by the end of August after other payments of foreign exchange obligations have been made, it will settle in the region of about US$1.86 billion," he said.

As for inflation rate, Shaw said that is expected that it will be at the low end of the targeted 7.5 to nine per cent if not even less.

Meanwhile the finance minister said that remittances are up in the first six months of this year by 8.7 per cent compared to the same period last year.

Interest rates continue to trend downwards now standing at 8.5 per cent in the Bank of Jamaica (BOJ) open market operation and 8.32 per cent for treasury bills.

"The last time we had seen rates even close to this was 1979 when the interest rate both in the treasury bill and the bank of Jamaica was in the region of 8.49 per cent," Shaw said, adding that this is a 31-year low.

The finance minister reiterated that there cannot be aggressive investment unless the interest rate in the commercial banking system comes down more aggressively.

"We have to keep reminding the commercial banking sector that the spreads are just too wide," he said.

"I don't know if there is any other country in the world that has spreads over the government treasury bills rate over a hundred per cent an and that is what continues to pertain in terms of the commercial bank prime rates."

This he insisted is unacceptable.

Shaw returned recently from Washington DC, where he signed an agreement with the IDB for another US$200 million at an interest rate of 1.51 per cent.

That Shaw said represents the second major allocation from the IDB, having borrowed US$230 million earlier this year.

"By December we will draw down another US$200 million," he said.


Source:
BY INGRID BROWN
browni@jamaicaobserver.com
Senior staff reporter
Jamaica Observer
Friday August 13, 2010

http://www.jamaicaobserver.com/business/Jamaican-economy-right-on-track-Shaw-_7876331