Wednesday 5 August, 2020

Golding lashes Gov't over unstable exchange rate

Golding, in a statement on Monday, urged citizens to hold the government accountable for what he said are “the major economic management failures” now taking place in the country.

Golding, in a statement on Monday, urged citizens to hold the government accountable for what he said are “the major economic management failures” now taking place in the country.

Opposition Shadow Minister for Finance, Mark Golding, is lashing the government over its management of the economy, in particular over the “instability” in the exchange rate which he said is driving up prices.

He noted that the dollar was making debt servicing more expensive while making it difficult for businesses to plan.

Golding, in a statement on Monday, urged citizens to hold the government accountable for what he said are “the major economic management failures” now taking place in the country.

According to Golding, this has left taxpayers with higher debt service obligations while at the same time paying more for light bills and necessary imports.

The shadow minister pointed to a severe shortage of US dollars in the system, despite the Bank of Jamaica (BOJ) selling US$50 million of the country’s reserves to commercial banks over the past seven days.

Golding also pointed to last Friday's selling rate of J$138.80 to US$1 which he said represented a fall of over J$12 (or 10 per cent) since the beginning of the 2019/2020 fiscal year on April 1. 

He noted that with almost two-thirds of Jamaica's public debt stock in foreign currency, it will cost more to service debt and pay for imports.

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Golding also highlighted that the rate of credit expansion in the economy has slowed this year when compared with last year. This, he said, was despite the BOJ lowering its policy interest rate six times from January to July 2019, with the rate moving from 1.75 per cent to 0.5 per cent.

At the same time, the BOJ has lowered the cash reserve requirement from 12 per cent to 7 per cent.

This has resulted in an increase in liquidity in the financial system by $28.1 billion. However, this is not having the desired effect, he said.

“The expansion of liquidity is adversely impacting the foreign exchange market, a predictable outcome given that Jamaica's inefficient credit transmission system remains substantially closed to small businesses and is not financing higher levels of economic expansion” Golding stated.

He noted that the official forecast of economic growth for this fiscal year has been cut in half to 0.7 per cent, with the closure of the JISCO Alpart plant in St Elizabeth and the fact that business confidence has fallen for two successive quarters.

“Repeated bouts of instability in the foreign exchange market are making it difficult for businesses to plan and invest,” Golding lamented

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