By McPherse Thompson, Assistant Financial News EditorTHE BANK of Jamaica (BoJ) has lowered interest rates on its longer term reverse repurchase instruments for the second time in two weeks, again citing continued stability in the foreign exchange market as well as an increase in tourism receipts.
Simultaneous with the reduction, the central bank announced the issue of an investment debenture with interest rate of 28.5 per cent, applications for which will be opened tomorrow and closed next Wednesday, July 16.
The BoJ, in a release, announced a 200 basis point reduction on instruments with maturities of 270 days and 365 days, from 29.5 per cent to 27.5 per cent and from 30 per cent to 28 per cent respectively.
According to the Bank, the decision to reduce interest rates took place against the background of continued stability and increased flows to the foreign exchange market. The reduction was also consistent with continued improvement in the tourism sector, as reflected in the January to May statistics, the release said.
ARRIVALS INCREASED
At a post-Cabinet press briefing on the budget and the economy at Jamaica House yesterday, Information Minister Burchell Whiteman said total visitor arrivals during April and May increased by 17.1 per cent over
the corresponding period last year. Preliminary data also show that gross foreign exchange earnings for the calendar year to June reflected an increase in visitor expenditure of 10.2 per cent over 2002, moving to US$643 million from US$583 million, he said.
The BoJ said interest rates on the 30-day to 120-day maturities remain unchanged, with the 30-day instrument retaining a rate of 15 per cent, the 60-day at 15.3 per cent, the 90-day at 20 per cent, the 120-day at 24 per cent and the 180-day at 26.5 per cent.
WELCOMED REDUCTION
Leo Williams, managing director of Jamaica Money Market Brokers Securities, said the general market welcomed the reduction in interest rates, noting that it was especially good news for the equities market and the budget. At the same time, he said "we are looking forward to them reducing interest rates on the short term instruments."
Although it has not been determined whether the reduction in rates has had an impact on the equities market so far, overall market activity yesterday resulted from trading in 17 stocks of which 10 advanced, two declined and five traded firm.
At the end of foreign exchange trading yesterday, the BoJ average selling rate of the United States dollar was $58.98 with the buying rate at $58.68, while the Canadian dollar was being sold for $43.45 and bought for $42.32, and the British pound was being sold for $96.82 and bought for $94.82.
The unlimited investment debenture announced by the central bank is being issued to help finance the Government's budgetary requirements for the 2003/2004 financial year and will be repaid in two equal instalments on October 16, 2004 and at maturity on February 16, 2006.
FIRST PAYMENTS
Interest will be calculated at a fixed rate of 28.5 per cent, with the first payments becoming due on October 16, this year. After that, interest will be paid quarterly on January 16, April 16, July 16 and October 16 until maturity.
The BoJ's reduction in interest rates at this time followed sharp increases in the entire spectrum of reverse repurchase instruments in March, following rapid declines in the value of the Jamaican dollar against its United States counterpart.
