Chart of the Week – NIR Replenishes

Source: Bank of Jamaica

For this week’s Chart of the Week we look at our Net International Reserves (NIR). The Bank of Jamaica (BOJ) Net International Reserves are defined as the U.S. dollar value of gross foreign assets of the BOJ minus gross foreign liabilities that will mature within a year. Since the start of the calendar year, consecutively the balance of the NIR account has fallen. Until now, on June 7th BOJ’s monthly publication on the Reserves reported that NIR for May 2013 was US$988.86M, which means the ‘NIR’s Downward Streak‘ was halted.

Source: Bank of Jamaica

In May the NIR increased by over US$122M from US$866.18M, a 14% rise over April 2013. However, May 2013 NIR represents a reduction of an estimated US$730M from May 2012 and a 58% depreciation of its value since May 2011.

The increase of the NIR is as a result of the Bank of Jamaica purchasing considerable amounts of US dollars from the local market and the receipt of the first portion of the IMF’s Extended Fund Facility (EFF) SDR 136.8M (US$205M as at May 31, 2013) of which ~42% was allocated for budgetary support, that is money to be directly lent to the Government of Jamaica. The money is converted into JMD by the BOJ. It therefore reduces the Government’s need to borrow from the domestic market, and is added to the BOJ’s stock of net international reserves.

In addition, Jamaica repaid the IMF SDR 51.8M (US$78.2M on the date of payment). As such, the net result of those two transactions, inflows of ~US$205M and outflows of US$78M, should have left Jamaica with an increase in NIR of US$127M. This is not far off from the US$122M increase observed in May.

Governor of the Central Bank, Brian Wynter has stated that the NIR is expected to continue to increase gradually over the fiscal year “due to growth in multilateral inflows and incremental improvements in private capital flows”. The NIR is 1 of 15 common indicators required for surveillance under the EFF. The BOJ is expected to report this data to the Fund monthly.

For more information on the other common indicators required for surveillance under the EFF check out our IMF Special Report.  Fueled by research, it is the first and only online information portal about Jamaica’s relationship and interaction with the IMF, providing valuable newsdata, timelines and resources.