Bank of Jamaica runs $6.9b loss

The Bank of Jamaica (BOJ) reported a loss of $6.9 billion so far this financial year, while holding no funds to distribute to Government, according to the balance sheet the central bank published on Wednesday.

The loss appears as negative retained earnings as at August 26, a position the bank confirms in a footnote as the year-to-date loss. A year earlier, retained earnings stood at a positive $19.12 billion. The swing between the two dates is roughly $26 billion.

The BOJ balance sheet also showed no “distributable profits” to hand over to the Government, compared to $401 million a year earlier. The central bank, at times, transfers surplus profits to the Consolidated Fund. The Financial Gleaner awaits responses to queries sent to the BOJ.

The loss during the period also affected capital, which dipped 10.5 per cent to $56.9 billion from $63.6 billion a year earlier. The balance sheet, however, grew over the year. Total assets reached $1.310 trillion, up 6.5 per cent from $1.2 trillion, with foreign assets of $1.06 trillion accounting for just over four-fifths of the total. Notes and coins in circulation rose 12.3 per cent to $313.5 billion.

Two liability lines moved sharply. Open market instruments, the paper the bank issues to absorb Jamaican-dollar liquidity from the financial system, fell 25 per cent to $254.7 billion from $339.85 billion. Public-sector deposits at the central bank rose 82.5 per cent to $244.58 billion from $134.04 billion.

Central banks can post losses without any threat to their operations, since they are not run for profit and can create the currency in which their domestic obligations are denominated. Losses of this kind typically arise when the interest a central bank pays to drain liquidity from the banking system exceeds what it earns on its foreign reserves, or when currency movements revalue its assets.

The Bank of Jamaica benchmark interest rate hovers at 5.75 per cent.

business@gleanerjm.com