Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, says the Government’s capitalisation of the central bank to the tune of $50 billion over two previous budgets was critical in ensuring liquidity in the system, better enabling the Government to cushion the effects of the global pandemic.
He was piloting the Bank of Jamaica (Amendment) Act, in the House of Representatives on Tuesday (November 17), which was approved by the members.
“It was a good thing we did it and did it at that time. When the pandemic hit Jamaica earlier this year and asset prices began to fall and customers of banks no longer were paying on time, liquidity became an issue,” Dr. Clarke said.
“The central bank was able to inject over $50 billion of liquidity into the system by purchasing bonds from financial institutions. By purchasing those bonds, which are assets that they held, they injected cash into the system, which allowed Jamaica to absorb the pressure that has come from this crisis,” he noted further.
“That wouldn’t have been as easy had we not capitalised the central bank in the way that this Bill envisions that we do, and we maintain that,” he added.
The Bank of Jamaica (Amendment) Act seeks to improve the governance of the central bank.
Dr. Clarke said it is designed to modernise and strengthen the BOJ and allow for greater transparency and accountability to maintain national economic well-being.
“This Bill clarifies the mandate of the central bank, provides for adequate capitalisation and institutes a robust and modern institutional framework,” he noted.
“It minimises the prospects of fiscal dominance as we’ve had in Jamaica’s past, by restricting conditions by which the Government of Jamaica can borrow from the central bank and the amounts,” he outlined.
He noted that the Amendments to the Act is an important step to modernise Jamaica’s monetary apparatus, specifically the BOJ, through clarification of its mandate and enhancement to its governance structures.
Leader of the Opposition, Mark Golding, in supporting the Bill, said one of the main objectives of the legislation is to establish inflation targeting in law in Jamaica.
“In practice, it has already commenced because the Government set an inflation target during the period prior to this Bill being produced and tabled but it wasn’t provided for in any legislative framework.
“This Bill now enshrines inflation targeting as one of the principal objectives of the Bank of Jamaica. This is a very important issue, because that was not previously the primary role of the central bank,” he pointed out.
The legislation will now be sent to the Senate for its approval.