Letter of the Day | Why Shaw so silent now on plummeting dollar?
THE EDITOR, Sir:
'The more things change, the more they remain the same' is a truism that bears repeating now, for the Jamaica Labour Party, now in government, made heavy weather of the policy of devaluation that the previous government, constituted by the People's National Party, pursued. This policy, we were told, was necessary, as the Jamaican dollar was viewed as being overvalued in relation to the world's reserve currency, the US dollar, and in order to make our exports more competitive, devaluation was a "necessity".
This necessity was to take the Jamaican dollar to a competitive exchange rate of about J$120:US$1. The then Opposition, led by shadow finance minister Audley Shaw, raised great alarm - and correctly so - at the steady and consistent trend of devaluation of an already abused currency. He then promised a halt to the slide, along with some amount of 'prosperity' in the form of an increase in the income tax threshold.
Now, some eight months into this JLP administration, the dust has long settled on electioneering, and the dollar again is in seeming free fall, so much so that in May 2016, the Jamaica Chamber of Commerce issued a statement saying that it was concerned about the level of devaluation affecting the currency, especially with inflation holding steady and the NIR appearing healthy. The depreciation has only increased since then.
NO HALT IN SIGHT
In spite of much talk on the part of now Minister Shaw, as well interventions by the Bank of Jamaica, the latest coming last Friday when US$30m was sold to forex markets, the dollar has depreciated by six per cent since February and by 7.52 per cent since January, figures which have already surpassed the entire devaluation seen for 2015.
With no halt in sight, this downward spiral can only serve to undermine the very 'prosperity' that Mr Shaw, et al, have promised. It goes without saying that this slide must be arrested, for in a country such as ours where the majority of raw materials used in production have to be imported, "devaluation for competitiveness" must be seen for what it really is - a false gospel.
If the slippage continues, the income tax break may start to ring hollow, for devaluation and prosperity cannot go hand in hand.