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Jamaica saves $52b on oil bill over six months

Published:Wednesday | February 10, 2016 | 12:00 AMSteven Jackson
A section of the Petrojam oil refinery in Kingston.

Jamaica reduced its oil import bill by more than US$438 million ($52 billion) for the first six months of the fiscal year based on the slide of commodity prices, according to newly released data from the Bank of Jamaica (BOJ).

The savings resulted in slashing the island's current account deficit to US$195.1 million between April and September 2015 from the deficit of US$632.3 million a year earlier.

It's rare for Jamaica - a net importer of finished products - to reduce its current account balance but the collapse of world oil prices has changed that trajectory. Jamaica achieved its first current account surplus in a decade in the January-March 2015 period. The current account documents the economic activities between the residents of a given country with the rest of the world over a given period.

"This improvement was driven by a fall in imports which was partially offset by a decline in exports," said the central bank's balance of payments report for September 2015. Global oil prices dropped from a recent high of US$115 in June 2014 to some US$31 a barrel.

Despite the fall in oil imports, Jamaica still imported more goods and services at US$3.23 billion compared to exports of US$2 billion over the half-year. But the reduction in oil imports narrowed the gap.

The capital account balance recorded a surplus of US$1.5 billion for the review period, primarily reflecting the discounted PetroCaribe debt repurchase, the BOJ said.

"This out-turn together with the balance on the current account yielded a combined net lending balance of US$1.3 billion, compared to a net borrowing balance of US$629.3 million in the previous corresponding period," the report stated.

The financial account recorded a net lending balance of US$921.1 million, which was mainly driven by transactions relating to the PetroCaribe debt repurchase, resulting in a net repayment of US$2.4 billion in 'other investment' liabilities and a net take-up of US$1.8 billion in 'portfolio investment' liabilities, primarily stemming from the issuing of two bonds in the September quarter.

Last July, Jamaica raised US$2 billion on the international capital market to finance the PetroCaribe debt buy-back. As part of the deal, the oil debt to Venezuela was discounted from US$3.25 billion to US$1.5 billion.