Shaw says stability in exchange rate a result of moral suasion
Minister of Finance and the Public Service Audley Shaw has suggested that the Bank of Jamaica used moral suasion by engaging players in the foreign exchange market to help bring about the current stability of the exchange rate.
Shaw told members of the Standing Finance Committee of Parliament on Tuesday that an initiative to "force a closer conversation between the central bank and the main players in the foreign exchange market" led to increased stability of the Jamaican dollar.
The finance minister said that a working group was established, which had weekly meetings to discuss how to halt the sliding dollar.
"There is no question in my mind that the information flow back and forth, has played a major part in the present stabilisation that we are having," Shaw noted.
He argued that with record foreign exchange reserves and record gross reserves, there was no objective basis on which there should be a continuous depreciation of the exchange rate.
Reduce BOJ intake
Additionally, Shaw said that the Bank of Jamaica was taking steps to reduce its intake of foreign exchange from the market.
"We hope that all our stakeholders in the foreign exchange business understand the importance of a stable exchange rate because without a stable exchange rate, and if it continues to devalue, it affects our debt numbers immediately," the finance minister stressed.
With a significant proportion of Jamaica's debt portfolio denominated in foreign currency, a depreciation of the local currency against the US dollar triggers a rise in the country's debt.
Earlier this month, The Gleaner reported that currency movements had resulted in a $68.8 billion upward movement in Jamaica's stock of public debt, which stood at $2.15 trillion at the end of December 2016 and which is expected to further increase to $2.18 trillion by the end of March 2017.