Letter of the day | On the value of the dollar
THE EDITOR, Sir:
Every so often, we hear complaints from Jamaican consumers that prices continue to increase despite the fact that the Jamaican dollar has been revalued in recent months.
In fact, the Jamaican dollar revalued from J$131.31 to US$1 on September 15 to J$125.12 to US$1 on December 27, i.e., by 4.7 per cent, while annual inflation to in November 2017 was 4.7 per cent with September experiencing 0.8 per cent and November 0.6 per cent.
Based on this, the Jamaican consumer has a case. The cost of living of the average Jamaican is increasing, while at the same time, the Jamaican dollar is being revalued. The Jamaican business person/retailer's answer that it takes some time for the revalued Jamaican dollar prices to flow through the system is a weak one as it relates to imported items. When the dollar was being devalued, local price increases were immediately implemented, and in fact, projected rate increases were built into costs.
The fact is that Jamaica is an island of importers, i.e., import and sell with very little value added. Most business people being importers are happy with the revaluation of the Jamaican dollar, importing at reduced cost, and not passing on the reduced costs to the consumer, and hoarding greater profits.
However, as we all know, Jamaica as a nation cannot achieve material growth (over three per cent) without exports playing a major part. Exporters are now suffering with their costs of production increasing due to inflation, while revenues from their exports are declining due to the revaluation of the Jamaican dollar.
We do not hear the same level of complaints because Jamaicans are a nation of importers. Our trade deficit is deteriorating 21 per cent in 2017 compared to 2016, which is not sustainable in the long term.
Revaluation of the Jamaican dollar can be more detrimental to the local economy, jobs, and growth than devaluation because of the effect it has on our exports.
What is needed is a stable Jamaican dollar devaluing only to reflect the inflation differential between Jamaica and its principal trading partner, the USA, i.e., approximately three per cent. This is necessary to keep our exports competitive and give our nation a fighting chance to achieve material growth.
Immediate past president of the Jamaica Chamber of Commerce