The country’s Net International Reserves (NIR) remain strong, with the Bank of Jamaica (BoJ) reporting holdings in excess of US$2 billion as at the end of October.
The figure of US$2.032 billion, though a reduction of US$48.40 million over the US$2.080 billion recorded at the end of September, represents more than 20 weeks of imports of goods and services, and will continue to provide some cushion and insurance for the future.
The rule of thumb employed by many analysts is that the reserves should be sufficient to pay for 12 weeks of imports of goods and services. By this measure Jamaica’s reserves are now in a reasonable comfort zone.
The NIR represents contingency funds, which can enable the country to survive severe external shocks, to cope with shifts in investor confidence and natural disasters.
While the reserves are not credited to the country’s revenues, they provide confidence to the markets that external obligations can be met.
In particular, a country’s reserve holdings represent an implicit guarantee that sovereign debt will continue to be serviced even in situations where access to new borrowing may be curtailed or become very costly.