THE Government is convinced that pressure on the Jamaican dollar will only ease with an improved balance of payment situation, but Bank of Jamaica Governor Brian Wynter says there will be no imposition or intensification of import restrictions to improve the situation.

“The concern is that we have a rate which is market-based and it was very clear that we had a major deficit in our balance of payments. Essentially, we won’t be able to overcome that deficit until we produce and sell more and the condition we have to face now is how we are able to produce and sell more,” Minister of Finance and Planning Dr Peter Phillips was quoted as saying recently.

But, according to Opposition Member of Parliament Mike Henry, who sits on Parliament’s Public Administration and Appropriations Committee (PAAC), there must be concern as to whether the Government can continue to stick to its commitments in the revised Letter of Intent (LOI) to the International Monetary Fund (IMF) in September, while the dollar continues to slide against the US currency.

Henry raised the issue at last Wednesday’s meeting of the PAAC, at which Ministry Paper 116/13 — which includes information on the First Quarterly Review of the current IMF Extended Fund Facility (EFF) and the revised Letter of Intent to IMF Managing Director Christine Lagarde, as well as the Supplementary Memorandum of Economic and Financial Policies — was discussed with the BOJ governor, Financial Secretary Devon Rowe, and Director General of the Planning Institute of Jamaica (PIOJ) Colin Bullock.

The PAAC member insisted that the current economic programme must be IMF-driven, and not IMF-supported as Wynter insisted, because the Government is committed to the Fund’s standard performance criteria, which blocks it from taking certain actions in support of the currency.

“Do we have a forecasting chart for the four years of this programme?” Henry asked the team, pointing to recent developments including the Jamaica Conference Board third quarter findings revealed Tuesday by Professor Richard Curtin, head of the Survey Research Centre at the University of Michigan.

The report showed that both business and consumer confidence in Jamaica had slipped to their lowest levels in several years. It said that rising unemployment and the continuing depreciation of the Jamaican dollar had weakened domestic demand and reduced revenues and profits, leading to a plunge in business confidence to the lowest level since 2009. It also held that consumer confidence had fallen to its second lowest level during the past 12 years, largely due to less favourable prospects for incomes and jobs

Henry contended that these developments were contrary to the economic picture painted by the Government in its letter to Lagarde, and specifically quoted the section which stated the Government’s commitment to “observe the standard performance criteria against imposing or intensifying exchange restrictions, introducing or modifying multiple currency practices, concluding bilateral payment agreements that are inconsistent with Article VIII of the Fund’s Articles of Agreement, and imposing or intensifying import restrictions for balance of payments reasons”.

But, Wynter responded that the insertion in the letter was a “boilerplate”, or a standard insertion in such contracts.

“The answer to this is the language is required by the IMF in such letters, because they will not enter into an agreement with you, unless you can commit to this,” Wynter said.

“So, in a sense, it is boilerplate language, but it actually is important and Jamaica does not have any such intention nor will it have any need to go through that kind of a path of intensifying or imposing import restrictions for balance of payment reasons,” he stated.

“We have operated an open account for decades, and that is not in question, at all,” he added.

Wynter remarked that he felt it important to make the issue clear to the committee, since Henry had raised it in his observations on the Letter of Intent.

“I should add, in respect to the letter, that I signed the letter and I am accountable for its content and it represents the embodiment of an entire team and, of course, it is the Government of Jamaica’s formal position that it has taken,” he explained.

In response to Henry’s question about a “forecasting chart” for the life of the programme, Wynter said that there is a standard letter that is produced every three months after the quarterly review which, essentially, updates the position that was established when the programme commenced.

“As things change, you will see things change here,” he said, explaining that the letter leads to an IMF staff report which is taken to the Fund’s board for approval. He said that the IMF staff report details past performances and projections up to 2020 for key variables that relate to the programme’s parameters.

“So one can draw conclusions and understand how that changes, as the world changes,” he said.

But, Henry suggested that wasn’t good enough.

“We must know that if the dollar devalues and prices go up if that’s going to put more people in unemployment lines or under PATH needs; and since that is a part of the programme, I would have thought that you would have had a graph which says when the dollar declines how it is going to affect poverty levels,” the MP insisted.

However, Wynter referred him to the Fiscal Policy Paper (FPP) which, he said, includes projections over several years, as well as documents available from the PIOJ that addresses the questions.

He said that it would be ill-advised for any market determined system to be putting out projections for the exchange rate.

“That’s probably why we continue to decline,” Henry commented.

Rowe, meanwhile, explained that the FPP is tabled by the minister of finance and planning each year in Parliament, setting out a macro-economic framework, a fiscal responsibility statement, and a fiscal management strategy.

“Did it state what the dollar would be today?” Henry asked.

“I don’t think there is anybody in the world who can tell us where an exchange rate can be at any particular time,” Rowe insisted.

“I disagree with you,” Henry reacted.