The Bank of Jamaica (BoJ) has signalled that it will be moving to discourage Jamaicans from holding large amounts of U.S. dollars.
The policy change was announced earlier on Monday.
The BoJ announced that it will reduce the incentives deposit taking institutions have for keeping U.S. dollar deposits.
The central bank said it will ask financial institutions to put more of the U.S. dollar deposits they have in the Bank of Jamaica.
This aspect of the new policy will take place in two phases, with financial institutions required to put 15 per cent of all U.S. dollar deposits they have in the Bank of Jamaica by April.
That move will effectively force local banks to pay lower interest rates to their customers on U.S. dollar deposits, which it is hoped will act as a deterrent to those who hold U.S. dollars for holding sake.
In addition, that policy will be reinforced by the BoJ, who will stop paying financial institutions interest on the U.S. dollars it holds on their behalf, which should further force banks to want to hold less U.S. dollars.
The hope is that these policies will remove the incentives for Jamaicans holding U.S. dollars.
For the Bank of Jamaica, it is to reduce dollarisation so that the policies it implements to affect economic growth and contain inflation will have greater impact.
Crowe Horwath Jamaica (www.crowehorwath.com.jm) is one of the largest public accounting, consulting, and advisory firms in Jamaica . Crowe uses its deep industry expertise to provide audit services to public and private entities while also helping clients reach their goals with tax, advisory, risk and performance services. Crowe Horwath Jamaica serves clients worldwide as an independent member of Crowe Horwath International, one of the largest global accounting networks in the world. The network consists of more than 200 independent accounting and advisory services firms in more than 130 countries around the world.
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