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Cut the $ whine

Zacca urges Jamaicans to stop talking down the dollar

BY KARENA BENNETT Business reporter bennettk@jamaicaobserver.com

Friday, July 11, 2014    

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THE Private Sector Organisation of Jamaica (PSOJ) is urging Jamaicans to focus on working efficiently to improve growth in the country instead of continuously talking about the devaluation of the Jamaican dollar.

Chris Zacca, the PSOJ president, acknowledged at this week's Jamaica Observer Monday Exchange that the sliding dollar is causing real pain. However, he believes that the emphasis being placed on the currency's value is distracting businesses from focusing on production.

"The dollar is a market-determined rate, anyway," he said. "Let's stop talking that it is going to be that much at the end of the year and let us put our heads down and do what we have to do to run the country and our businesses... Let's stop talking down the dollar."

Noting that there are benefits to 'right-valuing' the dollar, Zacca, who was accompanied by PSOJ Vice-President Don Wehby and the organisation's CEO Dennis Chung, admitted that the currency's devaluation hurts confidence, as business owners are unable to effectively plan.

"There is a real pain to devaluation, and that pain is in increased cost on imported raw materials and the costs to consumers," he said.

The Jamaican dollar began sliding in 2013 following a loan agreement between the Government and the International Monetary Fund (IMF), which insists that the currency is overvalued.

Yesterday, the Jamaican dollar traded at $112.71 to US$1.

Meanwhile, Wehby, who also chairs the PSOJ's Economic Policy Committee, predicted that the devaluation will slow down significantly from now until the end of 2014.

According to Wehby, in 2013 the Jamaican dollar depreciated by 14.4 per cent, five to eight per cent higher than what was projected for the year.

"How I analyse the value of the dollar being over- or undervalued is that I look at the differentials in inflation between our major trading partner and our economy," said Wehby.

That figure, he said, should have been about six per cent for 2013.

"Let us assume that in 2014 the dollar was at real value," he stated. "It has devalued for this year already by a little over five per cent; the projected differential for inflation for 2014 is six per cent, so based on that, the rate of devaluation for the rest of the year should be very slow."

Wehby, however, conceded that other factors could influence the downward movement of the Jamaican dollar.

"It is always a balance, and the prescription that we must devalue our dollar must be debated very carefully," he said.

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