The Jamaica Manufacturers and Exporters Association (JMEA) is calling on the Bank of Jamaica to take the action required to stem the continuing devaluation of the Jamaican dollar.
The JMEA says it is with deep concern that it notes that the Jamaican dollar has hit an all-time low of $156.70 cents against the US dollar as of Wednesday January 26.
The JMEA says this decline represents a devaluation of 1% for the first 26 days of 2022 and follows a devaluation of 7.4% for 2021, when the Jamaican dollar slipped from $144.41 to $155.15 against the u-s dollar.
It says these devaluations have a direct impact on inflation and make Jamaicans poorer, as they are less able to afford to purchase the necessities of life.
According to the association, the central bank traditionally says the rate of devaluation is influenced by the difference between Jamaica’s inflation rate compared to the inflation rate of the country’s main trading partner, the USA.
The JMEA states that, the Jamaica Consumer Price Index (CPI) rose by 7.3% in 2021 which was essentially the same as the increase in the CPI in the USA. It adds that based on this point, Jamaica should not have had any meaningful devaluation in the dollar.
In a statement, the JMEA says, Jamaica’s devaluation was caused more by a combination of factors including low inflows and lack of confidence in the exchange rate by the business community adding that , this devaluation could have been averted by the BOJ through timely intervention in the foreign exchange market, but this was not done adequately.
The business people say, the central bank continues to build up huge foreign exchange reserves which incur a very high cost to the country and these reserves are not being used to support the Jamaican dollar.
According to the JMEA as of last November, the market value of foreign reserves stood at USD$4.7 billion, an increase of USD$818 million over the last 12 months, yet, as of August last year, only $484 million US was used through the BOJ foreign exchange intervention and trading tool system to support the Jamaican dollar.
The JMEA says to further compound the dilemma, the BOJ increased its policy interest rate from 0.5% to 2.5% which will ultimately result in a further slowing of an already weak economy.