FX volatility posing a major threat to manufacturers — JMEA

Friday, November 15, 2019

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The Jamaica Exporters and Manufacturers Association (JMEA) yesterday issued comments regarding the prolonged decline of the Jamaican dollar over the last couple of days.

In a media release, the entity that regulates and coordinates the affairs of exporters and manufacturers in the country said that foreign exchange (FX) is a vital commodity for businesses in the manufacturing sector, especially given that a significant amount of the inputs are being procured from overseas. They say the events over the last few weeks have left manufacturers with much to fear.

“The recent volatility and supply constraints have apparently been fueled by known transactions within the financial community and have put tremendous strain on the market. Whilst we understand that in any market, there will be internal and external factors influencing the availability and price of the product, it is unacceptable to us that while there is no shortage of foreign exchange in the economy, manufacturers are not able to get foreign currency from the market,” the release stated.

“A survey conducted among our members indicates that foreign exchange has become increasingly expensive and difficult for them to access. Even with the Bank of Jamaica's (BOJ) interventions, end users continue to have difficulty accessing funds to pay suppliers of raw materials, spare parts, equipment and services procured from overseas. This is injurious to the manufacturing and export sectors, as it affects the cost of production, negatively impacts our competitiveness and flows through as a higher price to consumers. Additionally, the inability to pay suppliers for goods and services negatively impacts companies' reputation and credit worthiness,” the release said in furtherance.

The JMEA said that what is particularly alarming for them is that the sacrifice made by Jamaicans to reduce gross domestic product (GDP) debt ratio to improve the Net International Reserves (NIR) is being compromised by what they deem as the “less than responsible behaviour by some financial institutions”.

Highlighting the BOJ's intervention of US$70 million for two days consecutively, the entity reasoned that there has not been much benefit from this for their end users in the productive sector.

This has led them to call for urgent changes in how the fx market is currently operated.

Among the proposed measures are: Allowing for a portion of the flash auction by the BOJ to be directed to qualified end users in the productive sector; increased transparency for happenings in the FX market as a lack of transparency compromises competition; and a formalisation of foreign currency forward contracts by the banking system.

The JMEA in outlining these measures mentions that they hope to see positive responses to the issues hoping also that they be resolved soon.

“The JMEA represents people who are taking risk every day to create quality employment and improve the lives of Jamaicans. We believe that this is Jamaica's time to truly grow and we are intent on playing our part to make this a reality,” the entity said.


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