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Depreciating dollar bumps up nation's debt by $25b

Published:Thursday | December 13, 2012 | 12:00 AM
Peter Phillips

THE DEPRECIATION of the Jamaican dollar has resulted in the country's total debt stock increasing by approximately $25 billion between March and September this year.

Based on data published by the Bank of Jamaica, the exchange rate for the domestic currency relative to the US dollar moved from $87.3 to US$1 at the end of March, to $89.9 to US$1 at end of September.

The Jamaican dollar lost 3.0 per cent of its value relative to the US dollar during the period.

The medium term debt strategy 2012 indicates that a one per cent depreciation in the Jamaican dollar relative to the US dollar would increase the debt stock by approximately 0.5 per cent.

With 53 per cent of the $1.66 trillion public debt at the end of March denominated in foreign currency, the three per cent depreciation in the domestic currency would increase the debt stock by 1.5 per cent or approximately $25 billion.

$50.1B INCREASE

Information posted by the Ministry of Finance indicates that the country's total debt stock increased by $50.1 billion over the period, moving from $1.66 trillion at the end of March to $1.71 trillion at the end of September.

The fiscal deficit, which stood at $30.5 billion for the period April to September, has been a major contributor to the increase in the stock of debt.

On Monday, Finance Minister Dr Peter Phillips said the Government has borrowed less than what it had initially budgeted.

"Let me say that contrary to observation made in public media, there has been no extraordinary build-up of debt this fiscal year; it is not true," Phillips said in a thinly veiled jab at a report published in The Sunday Gleaner.

Data from diGJamaica.com for the period January to September 2012 showed that Jamaica had incurred an estimated J$81.9 billion of additional debt.

NO UNEXPECTED RISE

But speaking at a signing ceremony between the Government of Jamaica and the European Union at the Bureau of Standards on Monday, Phillips said there has been no unexpected rise in the debt stock.

"Indeed, the provisional out-turn shows that whereas we have budgeted for some incremental loan, we are below budget by some J$8 billion," Phillips said.

The finance minister said that while exchange-rate adjustments have "increased the stock of debt in some accounts", the Government remains on par with its Budget.

"I wouldn't want anyone to develop the notion that there is some profligacy in our containment of the debt and our commitment to contain our build-up of debt."