In a statement, the Opposition Shadow Minister of Finance and Planning Mark Golding maintained that prior to now, Jamaica has for many years operated a managed float system, in which the BOJ sought to achieve and maintain the competitiveness of the Jamaican economy against our major trading partners, while preserving stability and confidence in the economy and hope in the country.
“However, under the Government’s new exchange rate policy, it appears the BOJ is no longer able to manage the foreign exchange market to promote stability, predictability and confidence”, the Opposition Spokesman said.
He said the new policy has, therefore, facilitated the rapid depreciation of the Jamaican dollar, so that in the three-month June to August, the local currency has fallen in value by over 9% (from 126.38 to 137.96) against the US dollar. This rapid movement of the local currency has created a sense of chaos and fear, after years of hard-won and cherished stability. He pointed out that private sector, including small and medium sized enterprises, were now crying out as the situation now threatens viability.
Mr. Golding said the PNP had also noted that the recent dramatic depreciation of the Jamaican dollar was not driven by fundamental issues such as a lack of competitiveness, balance of payments problems or inadequacy of our international reserves.
Indeed, the Shadow Minister asserted that the IMF's article 4 review as at March 2018 indicates that the IMF considered the external position to be broadly in line with medium term fundamentals and desirable policy settings, the real exchange rate to be undervalued relative to their expected norm for Jamaica's current account deficit, and the external position to be in line with medium-term fundamentals and desirable policies.
In highlighting its concerns, the Opposition pointed to several significant negative consequences of the Government’s “pure free float” regime as presently operated. He said perhaps the most critical of the negative factors is the fact that merchants with substantial market power can be expected to react to this rapid depreciation in a commercially rational manner, and will price their goods and services using an exchange rate to avoid incurring foreign exchange losses. He said, Jamaica’s experience is that once prices rise in reaction to currency depreciation, they do not go back down.
Mr Golding further reminded that the incomes of the vast majority of workers and pensioners are fixed in Jamaican dollars, and the unemployed are also fully exposed to the local currency. These groups are likely to be hit by unmanageable increases in prices of goods and services which have a significant foreign exchange input, and will suffer a reduction in their standard of living.
The Government’s “prosperity” slogan has been exposed as hollow, and has become a cruel joke.
The Shadow called for a return to the exchange rate policy of a managed float system so that calm can return to the market and the panic among importers and consumers will end.
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