By Vernon Daley, Staff ReporterFINANCE MINISTER Dr. Omar Davies yesterday warned speculators that the recent action taken by the Central Bank to shore up the local dollar would continue for as long as necessary.
At the same time, the Minister revealed that the government this week had launched a new eurobond issue aimed at raising money in the international market to plug the hole in the budget as well as pay down the debt on a 200 million eurobond issue which becomes due on February 24.
"Stability and predictability in the foreign exchange market will not be compromised," the Minister said in a statement to the House of Representatives yesterday.
On Monday, the Bank of Jamaica (BoJ) moved to halt and reverse the continuing fall of the Jamaican dollar against its United States counterpart by introducing a 150-day paper instrument at 30 per cent interest.
In recent months the Central Bank has been using a mixture of measures to shore up the value of the Jamaican dollar.
"Although these measures have brought about some short-term stability, on each occasion there has been a return of the wild swings, which we consider unacceptable," the Minister said.
He defended the BoJ's recent intervention following criticism from the Jamaica Bankers Association that the measure "will have a disruptive impact on the financial markets".
Dr. Davies said the government and the BoJ were more concerned about the erratic movement in the dollar than the fact that some depreciation had taken place in recent months.
In January there was a four per cent slide in the dollar and in the first week of February alone there was a further one per cent depreciation. However, the BoJ intervention seems to be having a positive impact on the dollar. Yesterday, it stood at $51.42, up from $53.19 on Monday.
"Our recent economic history provides us with enough evidence of what unchecked depreciation can do to the economy and the society - unbridled inflation, instability in the labour market, increases in the debt servicing requirements and an erosion in the standard of living of the general population," the Minister said.
Responding to questions from Leader of the Opposition, Edward Seaga, Dr. Davies also disclosed that the government on Monday began the marketing of a eurobond issue to raise funds to close the gap in the budget and pay down the national debt.
