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Latest BoJ initiative could destabilize the economy – Dr. Daway
Concern is being expressed that the latest initiative to defend the value of the Jamaican dollar could have negative repercussions for the economy.
Of particular concern is the plan to increase the cash reserve requirement of commercial and merchant banks, as well as building societies by two percentage points come December 3.
The reserve requirement is the amount of cash that licensed financial institutions must have deposited with the Bank of Jamaica, which is used as an instrument to control liquidity in the market.
But Economist Dr. Davidson Daway says the withdrawal of funds from the market will tighten the availability of credit to the productive sector and further stifle the already floundering Jamaican economy.
Dr. Daway believes the authorities are heading down the wrong road with the latest measures.
Heading down the road travelled by the US & England
He is warning that the situation could be compounded by the global economic slump that is expected to prevail in 2009.
"That's where we're going to fall into the category like the America's and England ... firstly, the banks will not be able to lend money as much as they're lending now and I thought that this would be the first thing that the Minister of Finance would look into ... the fact that it's coming to our shores and it's coming fast."
Dr. Daway said what Finance Minister Audley Shaw needs to do is prepare the Jamaican people to understand that what they need to do is go back to their banks and make new deals on things like their mortgages and certainly their lending terms.
"This will make sure that when this thing comes, they can afford to pay their mortgages because what we're going to have is a lot of foreclosures just like the United States."
http://www.radiojamaica.com/content/view/13386/26/
Concern is being expressed that the latest initiative to defend the value of the Jamaican dollar could have negative repercussions for the economy.
Of particular concern is the plan to increase the cash reserve requirement of commercial and merchant banks, as well as building societies by two percentage points come December 3.
The reserve requirement is the amount of cash that licensed financial institutions must have deposited with the Bank of Jamaica, which is used as an instrument to control liquidity in the market.
But Economist Dr. Davidson Daway says the withdrawal of funds from the market will tighten the availability of credit to the productive sector and further stifle the already floundering Jamaican economy.
Dr. Daway believes the authorities are heading down the wrong road with the latest measures.
Heading down the road travelled by the US & England
He is warning that the situation could be compounded by the global economic slump that is expected to prevail in 2009.
"That's where we're going to fall into the category like the America's and England ... firstly, the banks will not be able to lend money as much as they're lending now and I thought that this would be the first thing that the Minister of Finance would look into ... the fact that it's coming to our shores and it's coming fast."
Dr. Daway said what Finance Minister Audley Shaw needs to do is prepare the Jamaican people to understand that what they need to do is go back to their banks and make new deals on things like their mortgages and certainly their lending terms.
"This will make sure that when this thing comes, they can afford to pay their mortgages because what we're going to have is a lot of foreclosures just like the United States."
http://www.radiojamaica.com/content/view/13386/26/
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