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In the midst of the changing of the guard at the Bank of Jamaica (BOJ) and the reports on the performance of the local economy, something important happened recently in Jamaica’s bond market.
While one auction does not constitute a fiscal crisis, and Jamaica’s macroeconomic fundamentals remain substantially stronger than they were a decade ago, the signal should not be ignored. Indeed, the government’s own debt-management strategy indicates that undersubscription has occurred in several recent market offerings.
The local bond market, as is currently the case in the United States, may be telling policymakers that capital is becoming scarce and expensive, just when Jamaica needs considerably more of it.
This will complicate the choices facing policymakers. For this is happening at a time when Jamaica is simultaneously rebuilding after Hurricane Melissa; is experiencing weak economic activity; is confronting inflation above the central bank’s target; and is operating in an uncertain international environment of expensive long-term capital.
