Economy Update: August 2013 NIR, Is It Enough To Pass September IMF Test?

Source: Bank of Jamaica
Source: Bank of Jamaica

diGgers Net International Reserves at the end of August 2013 was US$881.60M. At current exchange rates,this amount represents enough reserves to purchase less than 15 weeks of imported goods. Additionally this amount represents a ~5% dip in the balance of Jamaica’s “US$ savings” account from July 2013.

The reserves have lost nearly 13% of its value since the start of the 2013 calendar year. August’s amount of US$881.6M is the second lowest NIR to be recorded for the calendar year, US$866.18M that was recorded for April 2013 is the lowest.

Year over year comparisons, August 2013 NIR represents a decline of US$547M from August 2012’s US$1,428.60M and nearly 57% reduction from the US$2,126.32M that was recorded for August 2011.

 

Source: Bank of Jamaica
Source: Bank of Jamaica

For the diGgers who are wondering how the 5% dip in the reserves between July and August came about, it was mainly as a result of payments on August 1 & 8 that were made to the IMF totaling approximately US$81.3M for the 2010 Stand By Agreement.

At the end of July the balance of the NIR was US$929.72M, less the US$81.3M payment we were left with approx. US$848.42M.

diGJamaica believes the difference in the NIR between what we should have been left with after the payment and what we actually had at the end of the month of August (August NIR US$881.6 – Balance after payment to IMF US$848.42=”US$33.18″) was made up from open market operations to shore up US$ in anticipation of the September IMF test and the scheduled payment to the IMF due on September 25.

As at the end of July we maintained a strong Net Domestic Asset balance of over J$4BLn that could have been utilized for that purpose.

diGJamaica previously predicted that we would be below the September NIR target of $883.3M and our saving grace would be the IMF’s executive board approval of the results from the recently concluded June review which will unlock the second tranche of approximately US$30M on September 20.

This disbursement will allow us to sufficiently make the September 25 payment of approx.US$12M and pass the September Quantitative Performance Criteria set for the NIR (US$883.3M) as US$881.6M + US$30M second tranche= US$911.6M less the US$12M payment leaves us with US$899.6M, US$16M above target.

Additionally, we suppose further steps will be taken to purchase additional US$. Lets watch and see what the balance of the Net Domestic Assets will be at the end of September.

The Net International Reserves is a key indicator to watch closely as it has immense influence on Jamaica’s ability to complete the IMF agreement successfully.