January 7, 2021
News Release: Currency Issue
During the last eight work-days of December 2020 (21 to 31 December), Bank of Jamaica recorded net currency issue of $9.8 billion to financial institutions (commercial banks, building societies and cambios). The issue for the period contributed to an overall growth of $21.6 billion or 12.8 per cent in the currency stock for December 2020, in line with the Bank’s projection for growth of $22.0 billion or 13.0 per cent. The rate of growth in currency issue for the month fell below that for December 2019 (14.5 per cent), making it the lowest growth in a December month over the past decade.
At 31 December 2020, the stock of currency issued by BOJ was $190.5 billion (see Figure 1 above), representing an annual increase of 28.0 per cent, relative to an annual growth of 11.5 per cent at end-December 2019. When the estimated change in consumer prices is considered, the estimated real annual growth in currency for the period was 21.4 per cent, compared to 4.9 per cent for the corresponding period in 2019.
The strong annual growth rate in currency issue for 2020 may reflect the desires of deposit taking institutions and individuals to hold precautionary cash balances amidst the uncertainties occasioned by the COVID-19 pandemic and therefore is not an indication that overall spending in the economy for the year has increased.
The Bank anticipates that the majority of the currency issued during December 2020 will be redeemed during January 2021. For the last five years, net currency redemption in January averaged 77.2 per cent of the net currency issued in the preceding month.
Typically, Bank of Jamaica (BOJ) issues and redeems notes and coins daily in order to meet the demand for cash from individuals and businesses. There is normally a stronger demand for currency during the month of December, associated with increased spending over the holiday period. Financial institutions therefore request more currency from BOJ to satisfy this demand.
- Currency Issue: refers to Jamaican notes and coins in the hands of the public (currency in circulation) in addition to notes and coins held by financial institutions in their vaults (vault cash). Bank of Jamaica redeems (buys) or issues (sells) notes and coins to financial institutions when institutions have a demand for cash. The difference between currency issued and that which is redeemed during a period of time is referred to as net currency issue.
- Currency Stock or Currency in Circulation: (see Currency Issue)
- Real Currency Growth: reflects the percentage change in the real stock of currency which is calculated as the nominal currency stock divided by the consumer price index (CPI) at a given point in time.
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