Wed | Nov 14, 2018

'Don't worry' - Clarke tries to ease fears despite 'politicising of the exchange rate

Published:Thursday | July 26, 2018 | 12:00 AM
Clarke

Minister of Finance Dr Nigel Clarke has expressed concern over what he describes as the politicising of the exchange rate over the years.

With the Jamaican dollar trading at a record high of over J$134 to US$1, Clarke yesterday told The Gleaner that with Jamaica's floating exchange rate, movements in the value of the dollar were inevitable.

"So far, we have politicised the exchange rate, and that commentary completely excludes the international context as if to suggest that Jamaica exists in a zone of isolation," said Clarke.

"The movement in the exchange rate has long been politicised in Jamaica to the detriment of the Jamaican people. We have been fooled into seeing it as a proxy for economic health. We have somehow been led to believe that in the context of a floating-rate regime, appreciation is to be celebrated, and depreciation is bad," Clarke argued.

"The fact is that in a floating-rate regime, the exchange rate will move up and down and is only one price in the economy. It affects some other prices for sure but not to the degree that politicisation leads us to believe. It is the movement of average prices as measured by inflation, which already incorporates the exchange rate, that matters, and that influences quality of life," added Clarke.

The finance minister noted that due to economic conditions and inflationary pressures in the United States, monetary authorities have raised interest rates seven times since October 2016, but in Jamaica, monetary authorities have lowered rates eight times over the same period.

According to Clarke, the actions of US monetary authorities, combined with America's trade policies, have led to the US dollar strengthening against a host of currencies around the world.

He declared: "The Bank of Jamaica has more than US$3 billion in reserves, which provides the foundation of stability, and our balance of payments is healthy. There is no need for anxiety to set in based on movements in the exchange rate. Government policy is focused on low, predictable, and stable inflation."