An 11 per cent increase in remittances for the month of September year-on-year has helped boost Jamaica's trade balance, narrowing the deficit on the current account by US$3.6 billion, the central bank reported this week.

A larger import bill of US$408 million in September 2006 was only partially offset by US$172.6 million of export earnings, resulting in a trade gap of US$235.5 million for the month.

"The increase in export receipts ensued growth in earnings from alumina exports, reflecting increases of 17 per cent in volume and 1.7 per cent in price," said the Bank of Jamaica (BOJ).

In fact, Jamaica reached a new record in bauxite production of 15 million tonnes for year 2006, earning US$1 billion, the JBI reported in the first week of January.

Demand for US

The persistent rise in import costs which vaulted $3 billion in nine months have put pressure on the local currency, resulting from the demand by businesses and government for American dollars to pay their bills.

The local currency only lost four per cent of its value last year, but its stability came at the price of depleted reserves, from which the Bank of Jamaica sold cash into the market to rebalance supply conditions.

During the final calendar quarter, for example, the NIR was down by just under US$200 million.

The September 2006 trade gap was further offset by private transfers, including remittance inflows, of almost US$135 million plus travel receipts of US$62.8 million.

Those gains underpinned a three per cent improved showing on the current account deficit recorded at US$128.9 million in the current period compared to US$132.5 million in September 2005.

For the January to September 2006 period, however, the Balance of Payments were less rosy. The current account deficit widened marginally to US$822.5 million from US$818 million in the matching 2005 period.

The wider gap was due to a more than US$2 billion imbalance on the goods accounts, linked the Bank of Jamaica said to a bigger oil bill but also increased capital spending on machinery and transport equipment.

The deficit, however, was fully financed by private and other investment inflows of more than US$1 billion during the period, resulting in a US$255 million boost in the reserves in the 10 month period to US$2.5 billion.

The NIR has since fallen back to US$2.32 billion as at December.

business@gleanerjm.com