Bank of Jamaica (BOJ) Governor, Richard Byles, says Jamaica’s net international reserves (NIR), totalling just under US$3 billion as at February 16, should be “quite adequate” to see the country through the coronavirus (COVID-19) pandemic crisis.
Speaking during the BOJ’s digital quarterly briefing on Friday (February 19), Mr. Byles said that notwithstanding the fallout in tourism earnings due to a dramatic decline in visitor arrivals consequent on COVID-19, coupled with lower imports, inflows to the foreign exchange market have remained healthy.
He noted that between March 2020 and January 2021, daily purchases of US dollars by authorised dealers and cambios from end users averaged US$31.2 million, which was slightly lower than the average of US$33.4 million recorded over the previous period.
Additionally, Mr. Byles said daily sales to end users averaged US$27.7 million over the period of March 2020 to January 2021, which was slightly lower than the average of US$29 million a year earlier.
“Importantly, however, we also saw a dramatic improvement in remittance inflows, which served to cushion the effects of the fallout in tourism on our balance of payments. Private capital outflows were also tempered by a reduction in capital market foreign exchange investments,” he noted.
In assuring that the BOJ has been judicious in managing the country’s reserves, Mr. Byles said that “where we identify temporary shortfalls in the market, we have intervened”.
He indicated that total BOJ Foreign Exchange Intervention & Trading Tool (B-FXITT) flash sale operations, since the onset of the crisis in March 2020, have amounted to US$381 million.
Meanwhile, Mr. Byles said the current account deficit of the balance of payments is projected to deteriorate “mildly” from 1.6 per cent of gross domestic product (GDP) for fiscal year 2019/20 to 1.8-2.2 per cent for FY2020/21.
“While the performance of the current account deficit remains exemplary, it must be viewed in the context of the low levels of economic activity,” he emphasised.
Mr. Byles said the current account deficit is projected to remain at sustainable levels, ranging between two to four per cent, over the next two years.
“This is supported by expectations for a partial recovery in tourism arrivals, driven in large part by successful phased [COVID-19] vaccination programmes in key source markets and our assumption of careful control of community spread in Jamaica,” he said.
Regarding the foreign exchange rate, Mr. Byles indicated that this stood at J$151.42 to US$1 as at February 16, noting that it represented a depreciation of 6.1 per cent for the calendar year to date.
He pointed out that this pace of change is below the depreciation of 7.3 per cent recorded over the corresponding period in 2020, and is consistent with the usual seasonal pattern of flows in the market.
“From an exchange competitiveness point of view, the Jamaican dollar has gained on average by 1.6 per cent in 2020, relative to 2019,” the Governor noted.
Mr. Byles said that the foreign exchange statistics, gain in competitiveness of the Jamaican dollar and outlook for the external accounts, present an opportunity for stakeholders to “devote attention to driving meaningful export-led growth and to accelerate the pace of import substitution”.