Government Was Not Passive in Response – Shaw

Finance and the Public Service Minister, Hon. Audley Shaw, has again dismissed criticisms that the Government was passive in its response to implement measures to cushion Jamaica against the impact of the global economic downturn.
Addressing the monthly Private Sector Organisation of Jamaica (PSOJ) Chairman Club’s Forum at the Jamaica Pegasus Hotel, today (September 22), Mr. Shaw said the administration, rather than “crying wolf” and “creating panic” about the development, opted to adopt a “calm approach.”
“The first thing we did was establish a Financial Sector Monitoring Committee, and that was set up under my chairmanship. It has the Bank of Jamaica (BoJ), not just the Governor, but his senior staff. It has the Financial Services Commission (FSC), and it has representatives of my own Ministry, including the Financial Secretary. And every Tuesday morning when we meet, we examine issues on the international and local scenes, and we make proactive decisions and take action during the course of the ensuing week. This has led to financial stability that no one can challenge, and no one can deny,” Mr. Shaw emphasised.
Additionally, he reminded that the administration established a US$200 million line of foreign exchange liquidity, which the BoJ made available to Securities Dealers, who were “facing margin calls as a result of the implosion.”
“A sum of US$170 million of that amount was used up by our Securities Dealers. Our banks remain resilient, our financial sector remains sound, and we have not had any collapse of one financial institution. Countries that were held up as models to Jamaica… today, many of them are in deep trouble. One of them is now running deficits of 13 per cent, and they have had to establish a FINSAC-like institution, because banks have been failing in that country. Let us be thankful that we have, together, been able to maintain relative stability in the Jamaican economy,” the Minister said.
Mr. Shaw said these initiatives have resulted in inflation trending downwards, pointing out that up to the end of August, the rate, “point-to-point over last year, was 6.1 per cent.” This, he pointed out, had led to interest rates falling, and invited private sector input in further reducing them “much more aggressively.” This, the Minister argued, is achievable, in light of the fact that inflation is being “managed very carefully.”
“There is, therefore, no objective basis on which we should have such a wide differential between the inflation rate at six per cent and where interest rates are now. Interest rates need to go down further, and the private sector can assist us in this process. The quicker the banks respond to the directions that are being sent by the Bank of Jamaica, is the quicker the central bank can further, in the business of interaction, send further signals,” he said.
Mr. Shaw said there was a “certain sluggishness” to this end by stakeholders, the reasons for which, he contended, are not apparent. Arguing that there is no need for this disposition, he urged the relevant stakeholders to respond to the signals that are being sent. “We need to agree around the table that interest rates must go down more aggressively,” the Minister stressed.