Ja: Central Bank government's Santa

The Bank of Jamaica has become a kind of Santa Claus for government, bailing it out of a tight financial situation. The central bank had to lend government what is referred to as "printed money", near Christmas last year to enable it to meet the wage bill of public sector workers and interest on debts.

"Printed money" - a technical term - represents advances made by the central bank. Another view is that "printed money" is generating more money into the system than should be there which invariably leads to high inflation, the rate of increase in prices. Under the law, the central bank is allowed to advance to government up to a maximum of 30 per cent of the country's estimated revenue and also acquire government securities up to 40 per cent of the estimated expenditure in the same year. Based on the estimated expenditure of $278 billion and estimated revenue of $122 billion for 2003-2004, the government by law could be accommodated with a total of more than $100 million of "printed money" by the central bank.

The present law places the central bank in an untenable position. Therefore, the time has come for the government to put its fiscal house in order. It should balance its budget and leave the central bank to concentrate on its core function of implementing monetary policy, including the critical areas of reducing inflation and interest rates and ensuring foreign exchange rate stability. At present, the work of the central bank is being hampered by its intervention in matters relating to fiscal deficit.