UPDATED: Government policy focuses on preserving buying power of Jamaican dollar, says finance minister
The Government has made it clear that its priority is to preserve what the Jamaican dollar can buy even as there are jitters in the market about the slide in the value of the currency against the United States dollar.
Finance Minister Dr Nigel Clarke, who was speaking at a meeting of the Kiwanis Club of North St Andrew on Thursday, said that the policy, which is being ushered in, of a fully flexible exchange rate will result in more attention being paid to the average Jamaican who uses local currency to close transactions.
"Ninety per cent of the purchasing in Jamaica is done in Jamaican dollars. We pay fees in Jamaican dollar. We pay doctor's bills in Jamaican dollars; we buy guinep in Jamaican dollars; we buy yam in Jamaican dollars, and as a result of that, the policy has to be focused on what the Jamaican dollar can buy right here in Jamaica," Clarke said.
The finance minister argued that while there are external factors such as the exchange rate, at play, "the focus is on the bigger variable, which incorporates a number of other elements, including external value. The biggest variable is inflation".
"That is the focus of policy," he declared, further pointing out that the real fear of the people is losing their purchasing power.
Inflation at the end of July was low, coming in at 3.2 per cent, while as at yesterday, it cost $135.98 to purchase the US greenback.
EXPERIENCE THE NEW ENVIRONMENT
Clarke contended that the public, having suffered harsh economic times in the past, has been conditioned to believe that whenever the exchange rate moves, gloomy days follow.
"The twin experiences that we have had in Jamaica is of very high inflation accompanied with downward movement in the currency. But it is the inflation that has caused the pain. We have come to associate the pain from a high inflationary environment with movements in the currency, but the two are not necessarily intertwined in that way," the finance minister said.
Clarke admitted that it would take more than speeches from the Government for the masses to buy into his claim of the new paradigm being ushered in.
"We're going to have to experience the new environment so at the population level, people will understand that the environment that we are in is a mentally different environment than the environment that we have lived through. It's an environment of low, stable inflation built upon the fundamentals of a very responsible fiscal policy that has accompanied accelerating debt reduction," Clarke said.
(EDITOR'S NOTE: The headline attached to a previous version of this article incorrectly stated that government policy would be focusing on preserving the Jamaican dollar.)