The Jamaican dollar is now at an all-time high of $150 to US$1 as of the end of business day on Wednesday, August 12, 2020. This is an approximately 20 per cent decline in value coming from $126 to US$1 in March. This massive depreciation in just three months is uncharacteristic of the Jamaican dollar, which normally depreciates between eight per cent and 13 per cent on average per annum over the past years.

Why is it at $150?

A portion of the decline might be attributable to the global shutdown by the COVID-19 crisis, but much of it is as a result of domestic economic issues. The US economy has been impacted far more by COVID-19 than Jamaica, but their dollar has been more robust, so have many other countries. Assuming that the US is our main trading partner, the Jamaican dollar should not have depreciated by such a large percentage in such a small amount of time. There is a fundamental flaw in our approach to economic management.

What does a 20 per cent decline mean?

With such a decline in the value of our currency all of Jamaica’s foreign currency expenditure are now 20 per cent more expensive than they were in March. If you wanted to purchase an item for US$1 in March it would have cost you $126, but now, in August, it will cost $150, which is 20 per cent more. Any business/person holding foreign currency debt will have to find 20 per cent more money to repay the same debt they had in March. Manufacturers would have to pay 20 per cent more to import the same raw material as three months ago. This approach is setting us back and turning us into slaves. It must stop here.

What’s happening globally?

Over the last four years most countries have been internalising their policy to improve the domestic contribution to their economic base. For example, the UK exited the European Union and the US and China have imposed import sanctions on each other. These polices are geared towards bringing production home to increase the economic opportunity for the locals. Any sensible government should be thinking along these lines, especially since combating the COVID-19 crisis requires a new normal.

Modern countries have been making efforts to restore the strength of their domestic economies to bring production home to their locals. In this case their economies will become more robust and will be less affected by external shocks in the future. Jamaica should make efforts to do the same. We have to now begin to seriously look at high-growth industries, those I refer to as ‘Jack and the Bean Stalk industries, instead of the usual Jack and Jill approach, wherein they tumble down the hill with inefficiency.

What must Jamaica do?

We must look to create a modern economy with artificial intelligence, block chain technology, smart systems in agriculture and logistics as soon as possible. We cannot afford this present trend. Technology must be used to leapfrog our productive processes and increase our productive labour absorption rate. Technology should be given the opportunity to assist labour and thus increase its level of productivity. We must move from smart communities to smart cities, and then to a smart country, through a modern approach and thinking, which cannot be achieved without the right leadership.

Realistically, the strength of your economy is reflected in the strength of your currency. Combating a lower-valued Jamaican dollar requires that we unearth real value-added economic activity.

Where were we?

Before the COVID-19 crisis it was boasted that Jamaica was experiencing its lowest level of unemployment in the country’s history, but economic growth has remained at the usual one per cent per annum. This is signalling that the country is becoming less productive, as more labour is required to produce the same amount of output per annum, holding all other factors equal — the usual Jack and Jill approach, instead of Jack and the Bean Stalk approach that is desperately needed. These factors, however, are the fundamental handicaps that contribute to output volatility on a seasonal/annual basis.

How does Jamaica increase robustness?

In order to increase the robustness of the local economy at least 50 per cent of domestic output must be originated here — not the usual buy and sell from US and China type of business model. The COVID-19 crisis has shown that the tourism-dependent or remittance-dependent economy is far from robust and Jamaica must increase its productive efforts to play a real role in the global marketplace.

We cannot overemphasise that need for more efficient use of the nation’s resources to the benefit of its people. Proper planning is necessary to reduce inefficiency and wastage.

Firstly, our water resources must be properly distributed in order for us to call ourselves a modern country. My book Developing Sustainable Balance of Payments in Small Countries highlights many of these issues and provides plausible approaches to solutions. The country can only improve if it finds a way of increasing the global market value of the niche goods and services that it offers to the rest of the world and minimises culture exploitation by foreigners.

How does one create value?

Do not underestimate the power of sports and music. Let us modernise how we deliver these to the world. Let us resurrect the simple music and sports traditions that we are good at. We don’t have to follow all the time, sometimes we can lead. For example, if it is too costly to make world-class football fields, then create a world-class scrimmage field and let the world admire our simple difference.

Simple things like these create value and empower local communities. Do you get the gist?

Andre Haughton, PhD, is the People’s National Party candidate for St James West Central and senior lecturer in international finance at The University of the West Indies, Mona. Send comments to the Jamaica Observer or haughton.andre@gmail.com.