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A special team, comprising representatives of Jamaica’s main monetary and fiscal authorities, has been set up to monitor and analyse daily, developments in the current global financial crisis, and the likely impact on Jamaica, Prime Minister, Bruce Golding, has announced.
The Prime Minister said the move, which arose out of a meeting which he convened early last week with the principals of the authorities, namely: the Ministry of Finance and the Public Service, Bank of Jamaica (BoJ), Financial Services Commission (FSC), and the Planning Institute of Jamaica (PIOJ), aims to ensure that “timely and pro-active policy interventions” are taken in the event of possible repercussions.
Speaking at the Jamaica Manufacturers’ Association (JMA) Annual Awards Banquet, at the Hilton Kingston on October 9, Mr. Golding pointed out that when the crisis erupted with the collapse of Lehman Brothers on the United States’ (US) financial hub of Wall Street in New York, the BoJ and the FSC conducted an immediate assessment of local financial institutions, to determine the extent of their exposure to the risk of contagion.
This, he explained, was against the background of Jamaica’s increased participation in the US capital market, which would have included “some US securities in the portfolios of local institutions.”
“The authorities were satisfied that the level of exposure was limited, and in the event of margin calls on the few financial entities affected, the Central Bank was in a position to provide liquidity support. The Minister of Finance assured the country that there was no cause for alarm, and that there was no significant threat to our local financial institutions,” the Prime Minister outlined.
He pointed out that, following the meltdown of the 1990s, the regulatory framework governing the operation of local financial institutions was significantly strengthened, thereby ensuring that “critical ratios are maintained and sound practices observed.” However, he noted that assurance is relative to the integrity and soundness of the institutions and other licensed financial entities. “It does not mean that the Jamaican economy will not be affected,” he added.
Mr. Golding said areas of the economy and the manufacturing sector in particular, which are likely to be impacted, include: financing of the national Budget; remittances; tourism; exports; balance of payments; investments; and inflation, thus necessitating the move to establish the team.
“It is clear that the crisis is still unfurling. Since that meeting.the contagion has spread to European, Asian, and Latin American markets, prompting an unprecedented joint action by the world’s major Central Banks to cut interest, and for some Governments to inject cash to rescue failing banks. Stock markets have nose-dived.and stock value losses amount to trillions of dollars, and are climbing. No one can determine whether the worst has passed or the worst is yet to come. Nor can anyone be sure how long it will last, and how long it will take before recovery begins,” Mr. Golding said.
Noting that interventions by Governments and monetary authorities had, thus far, failed to cauterise the haemorrhaging, and that the crisis was being fuelled more by the “loss of confidence,” rather than market fundamentals, the Prime Minister stressed that the measures embarked on “will take time to work.”
“But, it reveals a telling truth that even the most ardent free marketers must now confront, that markets cannot be left to regulate themselves, that there needs to be a mechanism to maintain order in the global financial system,” Mr. Golding argued.