The Bank of Jamaica (BOJ) has said that given the continued effects stemming from the coronavirus disease (COVID-19) across the globe, it has factored the reality that there will be a significant fallout in foreign exchange (FX) as two major sources — remittances and tourism – become adversely impacted.

Dr Wayne Robinson, deputy governor with responsibility for the research and economic programming division and financial stability at the central bank, told the Jamaica Observer that the fallout in these two main areas of FX earnings will also carry consequential economic implications.

“In addition to the direct adverse impact on the welfare of recipients, the loss of this source of income will adversely affect economic activity as spending in the economy will also contract. This will amplify the impact of the fallout in other sectors on foreign currency inflows, overall gross domestic product (GDP), and employment,” he shared with the Business Observer.

He said that with gross remittance inflows providing about 16 per cent or US$2.5 billion and tourism US$3 billion annually, this will bring about sharp declines in the usual inflows of foreign exchange, especially as global markets feel the pinch of the deadly pandemic.

“Although the value of imported commodities, such as oil, will be significantly lower, this will not fully offset the impact of the declines in inflows. Consequently, we expect to see an appreciable widening in the current account deficit of the balance of payments,” he said.

Robinson however underscored that BOJ’s various measures, along with the country’s pool of net international reserves (NIR), now at US$3.2 billion, will allow the central bank to cushion some of the fallout in foreign exchange flows from remittance and tourism during this period.

“BOJ has taken a number of steps to mitigate the impact on the foreign exchange market. The bank has expanded foreign currency swap arrangements with authorised dealers and increased the limits on their foreign currency positions.

“These actions will allow the dealers to provide more foreign currency to the market. Bank of Jamaica stands ready to sell foreign currency to the market to facilitate businesses that need to pay for imports. We are in constant dialogue and consultation with financial institutions and will take the necessary steps to ensure the preservation of orderly conditions in the foreign market, he further told the Business Observer.