Devon Dick | Dollarisation, devaluation and Economic Growth Council
The International Monetary Fund (IMF) bemoaned that Jamaica's deposit dollarisation was among the highest in the region. At June 2016, 45 per cent of deposits were denominated in United States dollars. The IMF wants the authorities to counter the rising trend (The Gleaner, September 21).
This is probably indicative that the wealthy and the professional classes are converting their moneys and portfolios to US dollars, coupled with the reality that many investors in the tourism and manufacturing sectors do not keep their hard currency earned here, in Jamaica. It means that there is a big problem.
The problem is lack of confidence in the Jamaican currency and economy by the movers and shakers in the society. The constant devaluation of the Jamaican dollar has eroded confidence in brand Jamaica. Twenty years ago, thirty-five Jamaican dollars (J$35) could by one US dollar. Now it takes almost four times that amount to buy the same one US dollar. No house has appreciated in value at that rate and few salaries have increased by the same rate. The significant devaluation of the Jamaican dollar must stop for there to be confidence in the economy and significant economic growth.
The IMF has highlighted also the danger of two banks controlling such a large market share. There is the perennial problem of the wide spread between savings rate and loan rate in the commercial banks. A decade ago Jamaica had one of the widest spreads in the region. In addition, the spread between buying and selling of foreign currencies is too much. Minister of Finance Audley Shaw, in his earlier dispensation and now, complains about that, to no avail. He believes that issuing three new banking licences will increase competition and eventually lead to reasonable spreads. That is unlikely to shake those two banks. For many years, there is one major building society that does not charge certain fees and its action has not forced other financial institutions to do likewise.
Furthermore, seven years ago in a conversation with the head of one of the leading commercial banks, I argued that the spread was too much when compared internationally. His response was that their security costs were high.
Paradoxically, the Economic Growth Council recognises that access to capital is an impediment to economic growth. And the head of the council is Michael Lee-Chin, the chairman of NCB, one of the two largest banks operating in Jamaica.
It seems that Shaw should have a word with Lee-Chin and tell him that it is untenable for him to be head of the Economic Growth Council while his bank is benefiting from such a wide spread which is inimical to economic growth. Lee-Chin needs to set an example by making a contribution to economic growth of lowering the spread between loans and savings, and also in the trading of foreign currencies. This would be a shot in the arm for economic growth.
Furthermore, the Economic Growth Council has Patrick Hylton, group managing director, National Commercial Bank, an employee of Lee-Chin, on it. This needs to change forthwith because the big banks are part of the problem. One big bank should not have two representatives on the council. Why not the other big bank?
Additionally, the Church is not represented on the council and not invited to the meetings when the council shares its vision and mission. Economic growth need all hands on board and the collective Church, the organisation with the largest membership, has a role in spreading the message to a wide cross section of society and mobilising ordinary people to get involved in producing economic growth. Finally, who is the IT expert on the council?
For 5 in 4 ( five per cent growth in four years )to be a reality, these changes are necessary.
- Rev Devon Dick is pastor of the Boulevard Baptist Church in St Andrew. He is author of 'The Cross and the Machete', and 'Rebellion to Riot'. Send feedback to