KINGSTON, Jamaica – Prime Minister Bruce Golding of Jamaica, today said that the Jamaican Government has secured commitments for almost US $1billion from multilateral sources through to the end of March, as it seeks to maximise the flow of foreign exchange despite the downturn in foreign currency earnings caused by the global financial crisis.
At the same time, the Prime Minister had a word of caution for speculators who were hedging against the Jamaican dollar.
Mr. Golding was addressing the Montego Bay Chamber of Commerce, Tuesday, February 24, aboard the Carnival cruise liner, Liberty of the Seas.
The Prime Minister reminded his audience that the foreign exchange market is a free market which is influenced by the behaviour of the players in the market. “If earners of foreign exchange withhold it with the hope that the rate will go up, the rate will go up. If those who needed $100 demanded $200 in anticipation of a rate increase the rate will go up and if foreign conglomerates purchase foreign exchange in the local market to meet demands in other markets, the rate will go up”, Mr. Golding added.
“The Governor of the Bank of Jamaica has been in discussions with the major players in the foreign exchange market. They have agreed on certain parameters. The Government will do its part. Other stakeholders must do their part. We are all in this boat together and we must navigate our way out of this crisis together. If this collaboration between the monetary authorities and the market players is sustained, we will see interest rates coming down and the exchange rate remaining stable.”
Mr. Golding said the Government has worked hard to sustain foreign currency earnings from tourism, pointing out that Jamaica recorded a 4% increase in stopover arrivals last year – well below the 13% that had been projected before the global crisis but surpassing most of the Caribbean destinations with which we compete.
PM Golding addressing the quarterly luncheon of the Montego Bay Chamber of Commerce Tuesday afternoon (Feb. 24) aboard the Liberty of the Seas in Montego Bay Port. He used the occasion to remind his audience that the foreign exchange market is a free market which is influenced by the behaviour of the players in the market. Prime Minister Bruce Golding also received a plaque commemorating the inaugural call of the vessel at the Montego Bay port..
In explaining the pressure on the foreign exchange market in recent times, Mr. Golding said that in January this year there was a shortfall of US$3.1 million between the average daily inflows of foreign exchange and the average daily demand.
Turning to the current debate about interest rate policy, the Prime Minister said, “in the face of declining inflows and relatively higher demand, we demand lower interest rates and a stable exchange rate. It is possible but it depends not only on the actions of the monetary authorities but on the actions of those in the market who make their foreign exchange earnings available to the market, who limit their demand to what they need and who are prepared to accept moderate interest rates when they invest in order to enjoy moderate interest rates when they borrow. No one is hurt more that the Government by high interest rates because the Government is the biggest borrower,” said Prime Minister Golding, noting that the country is expected to lose $27 billion in revenue as a result of the slowdown in the global economy.
Government had been forced to curtail expenditure by $9 billion and accept a higher than programmed deficit.
“The prospects for the Jamaican economy are challenging. The economy declined by 0.4% last year. With the continuing fallout from the global crisis, it is expected to decline by 2.2% this year. That is in line with what is expected of the major economies of the world. We will do better or worse depending on the actions we take, the courage we display and the choices we are prepared to make,” Mr. Golding told the Mo Bay Chamber of Commerce.
The three day Cabinet retreat which started last Friday was reviewing the current situation and examining those choices.
