KINGSTON, Jamaica, Jun 8, CMC – Jamaicans were told not to panic as the local currency hit an all time low trading at J$100 to one United States dollar on Friday.
Lecturer in Economics at the Mona Campus of the University of the West Indies (UWI), Dr Andre Haughton, said that the J$100 to US$1 barrier is symbolic.
“We’ve been expecting this, there have been days before Friday where the US dollar was traded over J$100 in some instances, the Bank of Jamaica (BoJ) has a lot of reserves now.
“But they are still limited when we look at our foreign currency earning potential over the duration of time, so they cannot be defending the dollar too rigidly and maintaining the value for the short run and then in the long run we don’t have enough foreign currency to keep us stable,” he said.
The Jamaica Manufacturers’ Association (JMA) said it was concerned at the level of the local currency, saying the slide is a cause for worry.
JMA Deputy President Metry Seaga has warned of increased costs to local manufacturers.
“Because majority of raw material that are used in the productive process comes from overseas and anytime there are increases to those costs, we have genuine concern…we are concerned when we see dramatic movements like we have been seeing,” Seaga said.
President of the Jamaica Employers Federation, David Wan, said he is confident that the effects will not be negative.
“I think it could trigger some people to think that we are on a sliding dollar one more time and they are not sure where it’s going to end.
“But I don’t think it is going to go that way, the market is a free flowing market and the BoJ manages it. I don’t think it will be a runaway situation by any means we are in a better position than before the IMF (International Monetary Fund) drawdown, we have more reserves now,” he said.
The IMF said despite the recent depreciation of the local dollar, the currency still remains overvalued and asserted that further depreciation is needed.
On May 1, the Washington-based financial institution approved a US$932.3 million four-year Extended Fund Facility (EFF) arrangement for the island.
Jamaica has already received US$207.2 million including US$87.9 million in budgetary support for the government’s comprehensive economic reform agenda. The IMF’s first quarter review for Jamaica is due in August.
Since the end of April this year, the Jamaica dollar had been experiencing slight fluctuations in value in the region of J$99 to US$1. At the close of trading on Friday the weighted average selling rate climbed to J$100.08 against the US dollar.
Just over a year ago, the US dollar was trading at an average rate of about J$86.61.
