JIS News

The appreciation of the Jamaican dollar since the beginning of the year, particularly during the past two months, is market-driven, reflecting an environment of increased confidence.
This was stated by Governor of the Bank of Jamaica, Bryan Wynter, during an exclusive interview with the Jamaica Information Service (“Issues and Answers”, Television Programme).
Governor Wynter attributed the fortunes of the domestic currency to recent measures designed to address deep fiscal imbalances in the economy, such as tax measures, the debt exchange initiative, the engagement of the IMF standby arrangement and the Government’s fiscal responsibility framework.
The Central Bank Governor, while emphasizing that the Bank of Jamaica does not set the exchange rate, noted that the measures being implemented have created an environment of increased confidence, and one in which access to foreign exchange was no longer a problem.
He explained that the exchange rate was largely market determined, based on supply and demand, and that a functioning market was one in which everyone has confidence and can make informed business decisions.
“A strengthening exchange rate, once it is modest, is clearly a good thing, but we need to remind ourselves that we do not have a fixed exchange rate. We adopted for many years a market determined exchange rate for a reason,” he noted.
While the Bank of Jamaica does not set the exchange rate, it plays a critical monetary policy role, particularly in ensuring that the markets are stable and preventing wild fluctuations in prices and the exchange rate.
“The Bank does these in several ways. The fundamental one is that we use the most powerful. We use the parameters that influence it, things like essentially what is the growth rate of the money supply, trying to manage that in such away that domestic money supply being very much on top of the flow of foreign exchange into the economy and the level of reserves”, he said.
The Central Bank Governor said that tremendous pressures on the exchange rate of the recent past, which caused the Jamaican dollar to depreciate, was justified given the underlying conditions, including the country’s unsustainable budget and debt concerns.
“This situation became very grave; investors and market participants added to every transaction that would expose them to the risk of the Jamaican dollar.” he observed.
He added that problems with the fiscal accounts created costly expectations, pressures on exchange rate and high interest rates.
“Individual investors, companies who hold dollars and own dollars and those who participate in the market were uncertain about the prospects at that time. Six or seven months ago, the Jamaican dollar was under wider pressure, people built up stocks of foreign exchange,” he stated.
While admitting that the economy is not growing at this time, Mr. Wynter observed that the rate of decline has slowed and that confidence in holding on to Jamaican dollars has significantly improved. The Governor underscored the fact that the Central Bank does not pick the exchange rate and assured that, going forward, the Bank will have enough foreign exchange and will mange it firmly to ensure that the markets continued to function in a smooth and continuous fashion to prevent any exploitation of uncertainty.
He assured exporters and other economic agents of continued efforts to achieve and maintain stability in domestic prices, and that the market would continue to reflect the exchange rate.