JAMAICA'S FOREIGN reserves continue to be depleted on a monthly basis, with the latest figures showing a return to two-and-a-half year lows.
From a high of US$1.94 billion in March 2002, the net international reserves (NIR) have fallen almost consistently to their current US$1.08 billion as at August. The nation's foreign savings last weighed in below the one billion dollar mark at the end of January 2001, then recorded at US$931.24 million.
The current outturn covers an estimated 11.5 weeks of goods and services imports; and 17.5 weeks of foreign goods purchases alone. At peak, Jamaica had over 35 weeks of import coverage for goods, and just under 24 weeks coverage for goods and services.
The NIR is an important factor in their assessment of market conditions, analysts say, used as it is as a barometer of the monetary authorities capacity to mount a strong defence of the local currency, if required.
LATEST DROP
An outturn approaching $1 billion would have been cause for concern, analysts suggest, but the market has remained relatively unmoved by the latest drop, on expectations that the successful US$173 million take up in the indexed bond offer in the first week of September would have been used to rebuild the savings.
The Bank of Jamaica builds the reserves chiefly from funds Government borrows externally, having had little opportunity to grow savings from the more sustainable current accounts in the balance of payments, on which the country has run a deficit for years.
Whatever foreign currency the Government earns or purchases as debt, the central bank buys.
The performance of the NIR is therefore, closely linked with the performance of the debt and the country's ability to borrow overseas.
But, with net exports performing negatively leaving no surplus from foreign trade earnings to build the reserves, the financial accounts flows too small to break the back of that deficit, and Government having failed to go back to the international capital markets to raise debt since late last year, the reserves have been haemorrhaging at a rate of just under US$52 million per month since April, the start of fiscal 2003.
The reserves are used to back the currency when market demand puts unusual pressure on the exchange rate an activity the central bank has been aggressively engaged in since May when the rate slipped close to $70, and it is also a source of funds to service the external stock of debt. An unusual draw-down of US$257 million in February was largely used to cover maturing foreign debt.
