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Finance Minister Clarifies Financing Arrangement With BOJ

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Minister of Finance and the Public Service, Hon. Audley Shaw, yesterday (April 21) sought to clarify the financing arrangements between the Bank of Jamaica (BOJ) and the Finance Ministry.

He was responding to questions raised by the Opposition while making his closing presentation in the 2010/11 Budget Debate in Gordon House.

Mr. Shaw explained that at various points during the last fiscal year, the BOJ provided bridging financing to the Government.

He said in some instances, the financing was required as expenditure had to be made before the Government’s normal debt issues had accumulated sufficient funds.

“In other cases, such as just prior to the passage of the second Supplementary Estimates, the Bank advanced sums to settle securities that had matured, not because the Consolidated Fund had no money, but because Parliamentary approval had to be obtained for the Consolidated Fund to be debited,” he said. “All advances were for short periods and consequently, all were repaid.”

The Finance Minister further said the balance sheet of the BOJ will show that at December 2009 there was a net increase in the holdings of Government securities relative to a year earlier.

“The acquisition, as the Bank has explained in news releases, occurred in the context of the virtual closure of the bond market when uncertainties about the (Jamaica Debt Exchange) JDX were high,” Mr. Shaw told the House.

He said that since then, those securities have been gradually sold to the market and by the end of March 2010, only $6.8 billion remained to be sold.

According to the Minister, the securities have been welcomed by institutions seeking suitable instruments for their portfolios at a time when Government has not been making primary issues.

“We must insist that the role of the Central Bank is critical to maintaining financial system stability and its amplified role during the period of the JDX is a good example of that responsibility,” Minister Shaw argued.

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