US$1.967 Billion in Net International Reserves

The Net International Reserves (NIR) as at the end December 2011 stood at US$1.967 billion, an increase of some US$5 million over the November 2011 figure of US$1.961 billion.

According to the latest NIR update from the Bank of Jamaica (BoJ), the reserves as at December 31 represented over 19 weeks of goods and services imports, based on the estimated value of imports for the 2011/12 financial year.

The country's reserves remain comfortably above the international benchmark of 12 weeks coverage of projected imports of goods and services.

During his recent presentation at the quarterly monetary policy report, Governor of the BoJ, Brian Wynter, explained the issues which determine what level of reserves could be considered adequate.

"A central bank’s international reserve is considered to be adequate when it satisfies a minimum desired precautionary balance and the central bank, as in Jamaica’s case, is able to intervene in the foreign exchange market as the need arises," he said.

The literature on NIR adequacy has identified three common indicators of reserves adequacy, and according to the Central Bank Governor, these indicators compare the level of gross international reserves to imports, short-term external debt or a broad measure of money supply.

However, he observed that more recent thinking suggests that the reserves should be adequate to cover potential outflows in times of stress from all three sources combined. "An assessment of the trajectory of the Bank’s reserves against all of these indicators suggests that the Bank's reserves will be adequate into the medium term," he asserted.

The NIR is widely regarded as the “force that underwrites stability in the financial markets."

The reserves also serve to assure the convertibility of investments and the stock of blue chip assets that raises the international credit worthiness of residents, both corporate and private. The NIR is therefore seen as the "ultimate form of a contingency" arrangement for the country.