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Discussions on fixed exchange rate misplaced – IMF rep

Published:Thursday | June 13, 2013 | 10:17 AM

Dr Gene Leon, the International Monetary Fund (IMF) senior resident representative to Jamaica, is arguing that discussions on whether Jamaica should go the way of a fixed exchange rate is misplaced.

Speaking during a Gleaner Editors’ Forum yesterday Dr Leon said Jamaica needs to focus on fixing the fundamentals of its economy rather than being concerned with the value of the Jamaican dollar.

The Jamaican dollar closed at J$100.47 to US$1 after breaking the J$100:US$1 mark for the first time on Friday.

The IMF, with which the country has entered a US$2 billion four-year Extended Fund Facility, has said Jamaica's currency is overvalued.

Leon believes the slide in the dollar is a natural evolution of the status of the country.

The IMF representative noted that over the last 30 years, Jamaica has not been earning enough foreign exchange to meet the demand, which has resulted in depreciation.

He said a fixed exchange rate would not solve the gap in the earning and spending of foreign exchange which means that the central bank reserve will go down to zero because it cannot be sustained.

Audley Shaw, Opposition spokesman on finance, planning, growth and economic development this week called for the Government to open immediate and urgent dialogue with the critical stakeholders in the foreign exchange market seeking their support to temporarily fix the exchange rate at the existing level or close to it.

Economist Dr Damien King told the Forum that the devaluation in the value of the Jamaican dollar is correcting a major structural deficiency in the country's economy.

Donovan Wignal, president of the MSME Alliance, said the devaluation of the dollar does not represent gloom for businesses.

He says business owners must do whatever they can to mitigate the devaluation.


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