No shortage of foreign exchange - Shaw

There is no need for Jamaicans to be overly concerned about the noticeable increase in the pace of depreciation of the Jamaican dollar since mid-April 2016, following an almost unchanged exchange rate during March, Finance Minister Audley Shaw has assured

In making his closing contribution to the 2016-2017 Budget Debate in Parliament on Wednesday, Shaw cited the faster pace of depreciation over recent weeks as having been driven predominantly “by large portfolio-related transactions,” which are “not reflective of a deterioration in underlying economic fundamentals or confidence”.

He said the Bank of Jamaica (BOJ) has assessed that the underlying economic fundamentals remain positive. For example, he said for the fiscal year 2015-2016, the current account deficit of the balance of payments is estimated to have been 2.2 per cent of GDP, and the BOJ’s forecast is for it to remain within the range of 2.0 per cent to 3.0 per cent of GDP in fiscal year 2016-2017. The minister said a current account deficit at those levels is sustainable.

He said when taken together with foreign direct investments of 5.8 per cent of GDP in fiscal year 2015-2016 and 5.6 per cent of GDP projected for fiscal year 2016-2017, the country is earning on a current basis, what it needs in order to pay for its imports. Shaw said fiscal year 2015-2016 was the first time this position has been realised since fiscal year 1996-1997.

“Let me stress that there is no shortage of foreign exchange in the country. The country’s international reserves have also remained healthy and continue to exceed benchmark levels. Jamaica’s inflation is also very low by historical standards. Furthermore, the IMF, in its recent visit to Jamaica, reaffirmed that in its view, the exchange rate is now in line with fundamentals,” Shaw indicated.

He said against this background, the BOJ has acted to address the recent accelerating depreciation of the local currency. He said since last Friday, the BOJ has intervened by selling substantial amounts of foreign currency in the market, and this continued on Tuesday, to stem the pace of depreciation, which has now slowed.

Shaw said the BOJ’s Governor has committed to maintain a presence in the foreign currency market until conditions are settled there.

The minister said the approach underscores the Government’s commitment to ensuring orderly conditions in the foreign exchange market within the context of a flexible exchange rate regime.