The Bank of Jamaica - File

Moody's last week maintained its stable outlook on the Jamaican economy, but said the continued flood of cash from the central bank into the foreign-exchange market, as well as indecisive action on the debt could affect its next call on the country's credit worthiness.

The Bank of Jamaica has been selling hard currency to its dealers for resale at controlled rates as a buffer for the local currency.

It intervened at least three times last week, selling to dealers at $70.22 for resale at $70.27 on Thursday and Friday.

Jamaican dollar continues to slide

The Jamaican dollar continues to slide, nonetheless, trading Wednesday at $70.28 to the U.S. currency, a near five per cent decline calendar year-to-date.

The central bank does not comment on the amount of cash it sells into the market, but indications are the flows are in the tens of millions, partly reflected in the downward adjustment of the net international reserves (NIR).

The NIR, though reflective of both inflows and outflows, has been depleted by US$262 million (J$18 billion) in five months, April to August.

The reserves, which hit a high of $2.33 billion at the end of March 2007, were down to a year-to-date low of US$2.07 billion at the end of August.

A dip below the psychological US$2 billion mark could have negative market effect, just as the rise above it had boosted confidence.

Moody's signalled that Jamaica was unlikely to warrant an improved rating in the near term, saying that would take a combination of a reined-in deficit and significant reduction of the debt, adding that the probability of such an occurrence was low.

Inherits a delicate macroeconomic equilibrium

"The new Government inherits a delicate macroeconomic equilibrium which is suffering from the impact of Hurricane Dean and turbulence in the international financial markets," said Moody's, referring in the latter instance to the rolling effect of the fallout in the subprime mortgage market in the United States.

The Sunday Business understands that the Bruce Golding administration plans to begin reporting to Parliament as early as this week on the current state of the fiscal accounts, and will disclose that spending not included in the official accounts exceeds $20 billion.

Additionally, Golding and his team have to grapple with resuscitation and hurricane-relief financing, arising from the $20 billion of losses from damage to agriculture and public infrastructure and industries.

The international agencies and holders of Jamaican debt are also keeping watch on whether Golding's new finance team will be signalling changes in the macroeconomic programme.

"The economy, the fiscal and external positions as well as public-sector debt dynamics all remain sensitive to external and domestic shocks," said Moody's.

It continues to rate Jamaica as stable, however, because the country has always managed to weather shocks while maintaining debt repayment as a priority call on financial resources.

lavern.clarke@gleanerjm.com