UPDATED: IMF still thinks Jamaican dollar at risk of overvaluation
Jovan Johnson, Staff Reporter
The International Monetary Fund (IMF) is maintaining that the Jamaican dollar faces a risk of overvaluation, as authorities here point to the currency being at "fair value" in relation to the US currency.
The IMF restated the position it held in a June report in the latest country report on Jamaica it released on Tuesday.
"The exchange rate is broadly in line with fundamentals, but the balance of risks continues to point towards a modest overvaluation," the IMF said in Tuesday's document.
At his quarterly press briefing on Monday, Governor of the Bank of Jamaica, Brian Wynter had reiterated a statement he first made on November 15 last year that the Jamaican dollar was now fairly valued.
It's now costing just over $129 for US$1.
According to the IMF, a more depreciated exchange rate would help the country to get a more sustainable international investment position largely influenced by the size of the debt.
The fund has said analysis from 1996 to 2014 shows that a more depreciated Jamaican dollar makes Jamaica more competitive and corresponds to increased production.
Over the past two months, both Wynter and Finance Minister Audley Shaw, have sought to address public concerns over the pace of depreciation.
In Parliament earlier this month, Shaw, who was a strident critic of devaluation under the previous administration, said "greed and speculation" were driving the rate at which people are stocking up on US dollars.
He argued that there was no other reason because Jamaica has over US$3 billion in reserves and there was the assurance of continued support from the IMF through a new three-year deal that replaced the one signed in 2013.
Meanwhile, Dr Peter Phillips, the opposition spokesman on finance, said clarity is needed from the Government.
“I'm calling for greater transparency and discussion on these matters rather than it being treated like some kind of private issue between the Fund and the Government of the country."
The Jamaican dollar has been trying to find its 'true' value since the signing of previous deal on May 1, 2013, when it was at $99.33 to US$1.
On a visit here in July 2014, the IMF chief Christine Lagarde, said: "There is still a little way to go, not much." At that time the local currency was being sold for $112.03 to US$1.
(Editor's note: A previous version of this story incorrectly stated that the IMF believed the Jamaican dollar was currently overvalued.)