Amended BOJ Act now prohibits Government of Jamaica from borrowing from central bank

Effective tomorrow (April 16), the Bank of Jamaica (Amendment) Act of 2020 takes effect, giving Jamaica’s Central Bank operational autonomy in carrying out its mandate.

Finance Minister Dr Nigel Clarke, who made the announcement in a statement today, said,“with effect from this date, (Friday April 16, 2021) Jamaica’s central bank will be operationally independent with its principal objectives being the maintenance of price stability and financial system stability with the primary objective being the maintenance of price stability”.

According to Clarke, “with effect from Friday, April 16, the Minister (of Finance) will no longer have the power to issue directions on monetary policy and, as such, the Bank of Jamaica (BOJ) will unambiguously have operational independence in the implementation of monetary policy.”

One of the BOJ’s new statutory committees, the Monetary Policy Committee, will seek to achieve and maintain price stability through the achievement of an inflation target, set by the Minister of Finance in consultation with the Governor of the BOJ, as required under the Act.

To ensure transparency and accountability, the notification of the inflation target and minutes of the Monetary Policy Committee meetings will be made public in accordance with the amended Act.

The oversight capacity of the BOJ Board has been strengthened and the governance of Jamaica’s Central Bank has been made more robust by staggered board appointments, which prevent the entire board from being changed in a single political administration.

Prohibition of the amended BOJ Act

Instead, a single board vacancy will arise every two years. Furthermore, the amended BOJ Act now prohibits the Government of Jamaica from borrowing from the central bank, except in a declared national emergency by way of an order made by the finance minister, subject to affirmative resolution, and in keeping with the provisions of the Act.

In his statement today, Clarke explained that the principles of transparency and accountability, which underpin the modernisation and operational independence of the BOJ are designed to ensure better economic outcomes.

This institutionalisation of stability reduces risk premia and borrowing costs over the long term as there will be increased certainty about the conduct of monetary policy long into the future.

This, Clarke argued, will create the conditions for longer-term planning, deepening of financial markets and greater financial inclusion.