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Davies warns Gov't against BOJ loans

Published:Thursday | March 18, 2010 | 12:00 AM

Edmond Campbell, Senior Staff Reporter

OPPOSITION SPOKESMAN on Finance Dr Omar Davies yesterday urged Government to get its house in order quickly before borrowing from the central bank becomes a habit.

Revisiting the issue of Bank of Jamaica (BOJ) advances to the Government, Davies said the administration should make an "explicit statement as to the repayment schedule".

He said: "Once it becomes a habit it is something that is dangerous. It raises questions about the way in which monetary policy is being conducted."

Davies argued the Government now had a window of opportunity because of the recent Jamaica Debt Exchange programme.

"After the mood passes, then people are going to take rational decisions," he added.

The former finance minister asserted that the central bank would have few options to respond to excess money supply in the market if there was need for intervention.

Limited tools

"The tools available to it in this period are limited," he said.

Last month, central bank governor Brian Wynter signalled that BOJ advances to the Government would be reined in soon.

Speaking at the banks' quarterly press briefing at Nethersole Place, downtown Kingston, Wynter said: "The central bank will not be a source of funding for the Government going forward."

In his response, Finance and the Public Service Minister Audley Shaw said there was uncertainty relating to the IMF negotiations and a "false start on a debt exchange programme".

According to Shaw: "We realised that we would need the accommodation," adding that the IMF agreed with the move.

"We want to give the country the assurance that this was an aberration and for very good reasons, given the difficulty of the time," he said.