Sat | Jan 19, 2019

Dollar devaluation is detrimental

Published:Saturday | July 28, 2018 | 12:00 AM


I sometimes wonder if politicians think we are stupid.

Minister of Finance Dr Nigel Clarke made some strange utterances recently on the concerns raised about the declining value of the Jamaican dollar. He said the decline is not detrimental to the Jamaican people. He also suggested that there is no need to worry as the rate goes up and down.

Really, Dr Clarke?

I'm trying to recall the last time the rate gained any significant value in the Jamaican market. We are also concerned about margin of increase, relative to time. What Dr Clarke said surely applies to exchange markets in most other countries where rates go up and down over time and where rates are impacted by movement in interest rates, etc.

In the Jamaican context, there are more variables that cannot be ignored. It is not just textbook principles.

Politicians on either side - indeed all Jamaica - should be concerned about the continuing decline in value of our currency. This is not about politics. It is common sense and economics.

We know that the decline affects most prices and production, ultimately forcing up inflation. Fuel, especially, drives most businesses and the production of goods and services. Nearly every item will be affected by devaluation.

We also know that increasing demand for foreign currency will push rates up if supply is limited. We are concerned about the supply at a time when we hear that tourism is booming with record numbers of visitor arrivals.

We must be concerned about where the profits from tourism are really going. We also heard that there have been record amounts of foreign investments, and we know Jamaica receives significant inflows from foreign remittances.

Despite all this, there is no impact on the supply of foreign currency, Something doesn't add up. We ought to be curbing our appetite for foreign imports. We should be looking at ways to ensure that more profits from tourism remain on the island.