Editorial | Brian Langrin’s challenge

Brian Langrin takes office as governor of the Bank of Jamaica (BOJ) at an important moment on the country’s economic journey. He succeeds the highly regarded Richard Byles, whose seven-year tenure helped consolidate BOJ’s independence, inflation-targeting regime, and institutional credibility through COVID-19, global inflation, and extraordinary internal and external shocks.

Dr Langrin, therefore, inherits a much stronger central bank than many of his predecessors did. His first obligation is simple: protect it.

But he also arrives when Jamaica’s economic challenges are changing.

For the past fifteen years, the national consensus on economic policy was dominated by stabilisation: reducing public debt, restoring fiscal credibility, accumulating reserves, controlling inflation, and strengthening financial institutions. Considerable progress has been made.

The success of the fiscal programme made the execution of monetary policy of the Bank of Jamaica much easier.

Jamaica’s next challenge for the country is turning stability into sustained productivity, investment, and economic transformation to realise broad-based prosperity.

WELL PREPARED

Dr Langrin, on paper at least, is well prepared for this transition. He previously spent more than fifteen years at the BOJ, serving as an conomist and later heading financial stability. He helped advance important institutional reforms and was part of the Government of Jamaica technical team on two sovereign debt restructurings. His subsequent career included senior responsibilities at the International Monetary Fund-The Caribbean Regional Technical Assistance Centre (IMF-CARTAC), the Inter-American Development Bank, and at the World Bank.

He, therefore, understands two aspects of Jamaica’s economic problem: the importance of macroeconomic stability and the need for development finance.

From the perspective of this newspaper, and the needs of Jamaica, Dr Langrin’s agenda should emphasise a number of key priorities.

First, he has to defend the BOJ’s independence. There must be no ambiguity here.

The credibility that was painstakingly built over the past decade and a half is a national asset. Dr Langrin, who was part of the early efforts, must preserve the inflation-targeting framework, resist political pressure, and maintain confidence in the overall Bank of Jamaica policy regime.

His arrival, however, coincides with inflation again well above BOJ’s four to six per cent target amid continuing international uncertainty. This is an immediate challenge that he and his Monetary Policy Committee members must grapple with.

Of course the Bank of Jamaica must distinguish between temporary supply shocks and persistent inflation. Raising interest rates cannot produce vegetables, repair hurricane-damaged farms, or reduce international oil prices. Monetary policy must prevent temporary price shocks from becoming embedded in expectations without unnecessarily weakening investment and reconstruction.

UNFINISHED BUSINESS

The second item the new governor should tackle is improving the monetary transmission mechanism. This is unfinished business of the Jamaican monetary policy agenda.

Changes in BOJ’s policy rate still transmit imperfectly into commercial-bank deposit and lending rates. Structural liquidity, shallow capital markets, and limited competition weaken the mechanism through which monetary policy influences economic activity. This must be addressed.

Dr Langrin’s background in financial stability suggests that he is qualified to investigate this problem of why Jamaica’s financial system does not convert national savings into productive investment more efficiently.

As a third item on the new governor’s plate, the Bank should help society to deepen the understanding of productive financing. However, the BOJ must not become an industrial-policy institution or development bank. This would destroy its balance sheet and its independence.

But financial regulation is not economically neutral, and Jamaica needs considerably more long-term capital for renewable energy, technology, advanced agriculture, manufacturing, climate resilience, and innovative small businesses. The Bank can leverage its knowledge and “soft power” to give guidance in this area.

BOJ’s role should continue to ensure that regulation protects financial stability without unnecessarily discouraging productive risk-taking.

The new governor needs to rethink the BOJ’s digital currency initiative, JAM-DEX. Jamaica was among the pioneers of central bank digital currencies, but JAM-DEX adoption has been disappointing.

WHAT PROBLEM DOES JAM-DEX SOLVE

This is more than a marketing problem. The new governor should start by asking: What economic problem does JAM-DEX solve better than existing payment mechanisms? Government transfers, tax refunds, disaster assistance, small-business transactions, and perhaps eventually, regional payments could provide practical applications. Technology succeeds when it becomes useful.

The objective of the Bank and the GOJ should, therefore, be to shift from just promoting a digital currency to constructing an efficient digital-payments ecosystem.

Richard Byles’ era helped institutionalise Jamaica’s macroeconomic stability. Dr Langrin’s challenge is to preserve that achievement while helping connect it to something larger: national transformation.

The central bank cannot create internationally competitive firms, technological capability, or productivity growth. However, it can help create the monetary and financial environment in which they become possible.

The new governor’s initial statements on his role and responsibilities implied a keen understanding of the critical importance of the job he is undertaking.

Now that he is installed at Neethersole Place, Dr Langrin has to translate intellectual understanding and technical competence into concrete achievements.