A doomsday comment by Senator Don Wehby that Jamaica's net international reserves (NIR) could be spliced by half this year is raising hackles across financial circles whose members say the speculation is pointless and could cause panic.

Analysts were not prepared to comment, and those who did requested anonymity.

Wehby's off-the-cuff comment - which diverged from his prepared speech Tuesday at a Scotia DBG Investment seminar for corporate clients - that the foreign reserves may decline to US$800 million by March 2010, counters the Bank of Jamaica's position that outcome would be no worse than the last fiscal year.

The BoJ had forecast US$1.75 billion of reserves at fiscal year end March 2009, but ended with US$1.63 billion.

A month later, at April 30, the NIR stood at US$1.65 billion, representing 12 weeks of cover for goods and services imports.

BoJ, which will have its next quarterly briefing on monetary policy on May 20, is yet to announce its 2009-10 forecast for the NIR.Central bank governor Derick Latibeaudiere, reached for comment Wednesday on Wehby's statement said it was pointless to comment on what seemed to be a worst case scenario.

"I don't want to go into the realm of speculation on an issue that is market-sensitive and could cause discord in the economy," said the central bank chief.

"We are targeting to keep the NIR flat."

At the same time analysts say they see no cause for the NIR to fall to such low levels given the current US$1.65 billion of reserves at the BOJ, plus another US$300 million that is owed by the banks, and which does not show up in the accounts as part of the reserves.

Strong defence

Still, no one was prepared to dismiss Wehby's forecast entirely, given the current state of the economy and the strong defence of the currency that the BoJ had to launch last year, depleting the NIR by a net US$600 million in the process, from its peak of US$2.26 in May 2008.

"It's not encouraging and could cause more instability in the foreign exchange market," said one analyst.

Presently, all the country's major foreign exchange earners are on a downturn, including remittances, tourism, and bauxite/alumina even as imports continue to grow - pushing the current account deficit to US$3.22 billion in calendar year 2008 when the country's merchandise import bill rose above US$7.7 billion.

The real economy in the current scenario is expected to decline by about 3.0 per cent this year, or best case, 2.5 per cent.

Within that context, Prime Minister Bruce Golding and his Finance Minister Audley have been walking a tightrope since The Gleaner first reported that exploratory talks had been held with the International Monetary Fund in case Jamaica needed balance of payments support.

Speculation is the support being sought could be as much as US$1 billion (J$89 billion, with the noise growing so loud that Golding came out this week to declare that the IMF was not the first option, and would be tapped only in a worst-case scenario.

The exploratory talks in Washington were led by Wehby and Latibeaudiere.

sabrina.gordon@gleanerjm.com