Members of the small business community say recent rate hikes by the Bank of Jamaica (BOJ) has sent them into “survival mode”.

Donovan Wignall, president of the MSME Alliance, speaking earlier this week at the Jamaica Observer Business Forum, joined the chorus of calls for the central bank to halt the rate hikes.

“The hiking of interest rates in the Jamaican context is not the fix for Jamaica’s inflation now,” Wignall posited as he argued that the context in which inflation was pushed above target in countries like the United States is different from the issues which led to inflation locally.

“The countries that are increasing interest rates now, like the United States, for example, issued a lot of cash payouts to their citizens during COVID. That cash payout caused their inflation. Also, the supply chain challenges which include the cost of labour, the war in the Ukraine, all of those things came together to create a perfect storm for the type of inflation those countries are experiencing.”

By contrast, he continued: “Our inflation is primarily driven by the cost of energy and supply chain challenges. Those issues would have been normalising overtime which has been leading to a slowing of our inflation.”

“If we are not careful, especially with warnings that the US and Britain could enter a recession if those countries continue to raise interest rates, and we continue to raise our rates, then we are really heading into some serious headwinds economically if we continue to do that,” he told the Jamaica Observer.

Wignall pointed out that businesses are seeing higher rates for loans on their books and that is impacting cash flow.

“We are in survival mode,” Cordell Williams-Graham, president of the Young Entrepreneurs Association (YEA), chipped in. She pointed out that small business operators who have borrowed to run their businesses have to be seeking new ways to keep afloat with expenses from higher interest rates adding to inflationary prices all around.

“People who have borrowed money to restart their business as the economy reopened are now seeing their interest rates going up. Some have used credit cards in running their businesses and those rates are going up and the money to service that monthly is going up. If you took out a mortgage to buy the building in which you are operating, or borrowed to buy the machine that helps to produce your goods, or consolidated debt to make the repayment terms easier — all of those interest rates are going to go up based on what the BOJ is doing. How is that going to impact your business? It’s more expensive. Your life will be a little harder. It will be more difficult to find monies to run your business and make little room for reinvesting. It’s going to be tough,” Wignall added.