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JAMAICA | Opposition calls on the BOJ to explain the falling currency

Featured Shadow Minister of Finance & Planning Mark Golding Shadow Minister of Finance & Planning Mark Golding
KINGSTON, July 25, 2018 - The Opposition People’s National Party is once again expressing concern at the lack of communication from the Bank of Jamaica on the recent rapid depreciation in the value of the Jamaican dollar.

 

Since April this year, there has been significant volatility in the exchange rate, with the Jamaican dollar falling to a new record low of J$134.05 Jamaican dollars to US$1.00 in yesterday’s trading, and the BOJ buying as high as J$137.00 to US$1.00 in today’s scheduled auction.

The lack of communication from the Central Bank has left room for unhelpful speculation as to what is behind this, it even being suggested that the BOJ is deliberately driving the fall in the currency in order to increase inflation, which for January to June 2018 was negative (-0.3%) and well below the BOJ’s 4% to 6% target range.

Shadow Minister of Finance & Planning Mark Golding said - “The BOJ needs to explain its exchange rate policy, as consumers and many in the business community are now very anxious and confused. With international reserves reportedly being ahead of target, the question arises as to why our dollar has fallen over 6% since April and is still falling. This is not the time for silence, and the BOJ must explain, clearly and openly, what is really going on.”

He continued – “Why is the currency under such pressure at this time, in what remains an underperforming growth environment, characterized by low aggregate demand and low inflation?”

In the meantime Jamaicans are being told to brace for continued fluctuation of the local currency against the US dollar.

Fayval Williams, Minister without Portfolio in the Ministry of Finance, said on Wednesday morning that there is greater demand for the US currency.

Speaking at the Post Cabinet Press Briefing, she said more companies, “looking at their debt structures,” are purchasing US dollars to service those debts as interest rates in the local market decrease.

Noting that “a lot of companies have US dollar debts on their books,” she said that “as rates converge in the local market, it’s advantageous for them to change out those US dollar loans into Jamaican dollar loans.”

This, she said, was a very good strategy, “but in executing these transactions what actually happens is that the companies have to go into the market to buy the US dollars to repay the loans, and that causes increased demand.”

An additional factor driving the slide in the value of the Jamaican dollar, she said, a significant increase in imports this year, compared to 2017.

Mineral fuels, machinery and transport equipment, chemicals, manufactured goods and food were the leading items being imported, she disclosed.

Last modified onWednesday, 25 July 2018 20:43
  • Countries: Jamaica

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