Sliding dollar? No problem... Byles

Sliding dollar? No problem... Byles

BY KARENA BENNETT Business reporter bennettk@jamaicaobserver.com

Tuesday, January 19, 2016

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Co-chair of the Economic Programme Oversight Committee Richard Byles is again defending the sliding of the Jamaican dollar — stating that the tight fiscal policies put in place by the IMF, along with reduction in oil prices has resulted in a 50-year low inflation rate of 3.7 per cent at the end of calendar year 2015.


According to Byles, the decline in inflation, in addition to the five per cent currency depreciation the country experienced last year, has positively impacted the Jamaican dollar’s competitiveness to the United States dollar by 1.3 per cent in point to point currency change.


"Sounds almost first world," he stated in relation to the country’s current inflation rate at a press briefing at Sagicor’s headquarters in New Kingston, yesterday.


"We have to say thanks to the tight fiscal policy, and very much so to oil which has played an important role in bringing inflation down. When you look at inflation for the calendar year of 3.7 per cent and devaluation of five per cent, it’s within range and you’ve heard the governor on previous occasions saying that our currency was sufficiently competitive and will not devalue anymore. I guess this is one of the factors he was referring to, why inflation was coming in much less than previously expected. That gives us a competitive gain of 1.3 per cent from the 3.7 per cent and 5 per cent."


In his presentation, Byles referred to a breakdown of how a number of Jamaica’s trading partners’ currencies performed against the US dollar in 2015, adding that many Jamaicans are of the belief that devaluation takes place only in Jamaica.


According to the report, Europe, Canada and the United Kingdom experienced currency depreciation against the US dollar of 10.2 per cent, 16 per cent and 5.4 per cent respectively, while the Chinese yuan devalued 4.3 per cent.


Japan also slipped 0.3 per cent, Brazil down 31.8 per cent, Mexico down 14.3 per cent and Trinidad and Tobago also devalued 0.9 per cent in point-to-point change against the US currency.


"Many of these countries are our trading partners; we buy and sell to the European Union, Canada, UK, and China. So when their currency moves versus the US dollar, if ours doesn’t move it means we are not as competitive as them. When you look at our devaluation versus the US, that’s step one, but you also have to look at our currency versus other major trading partners," he stated.


"If you take a country like, say, Europe, or Canada, and tourists that want to come here to Jamaica, but because their currency has devalued 10.2 and 16 per cent, [people] would find it more expensive to come here and they are a major trading partner and a fairly major source of our tourism industry," Byles added.


He stated that Mexico, which has declined 14.3, is now seen as more attractive than Jamaica to a tourist.


"So if you’re an American and you look to Mexico which has devalued 14.3 per cent, that means your US dollar is 14.3 per cent stronger in Mexico than Jamaica where it is 5 per cent stronger," the co-chair said. "So just like in business, you have to be watching your competitor, it can’t be just what you are doing."


Measured against the Government’s budget, Jamaica also produced a primary surplus of $55.8 billion compared to $50.5 billion for the fiscal year to November. At the end of December, the net international reserves stood at US$2.44 billion, comfortably in excess of the International Monetary Fund target of US$1.64 billion for December.


Tax revenues for the first eight months of the fiscal year (April to November) were 2.5 per cent ahead of target at $6.2 billion and 14.2 per cent or $31.9 billion above the same period last year. Expenditures for the period were also $8.3 billion below budget, while revenues from grants lagged behind at $3.3 billion, according to the report.


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