By Andrew Green, Staff ReporterCONSUMERS WILL have to dig deeper into their pockets as a result of the sharp fall in the value of the Jamaican dollar since the start of the year, private sector sources say.
The currency fell to a new low average selling rate of $59.34 to the US dollar yesterday, with the rate falling as low as $60.20 in trading. The currency has lost $8.37 in value against the US dollar in less than five months since the start of the year. For all of last year the Jamaican dollar suffered a $3.57 loss in value.
"We are trying to absorb costs but we cannot absorb any more," said Jamaica Manufacturers Association president Clarence Clarke. "We will have to pass it on." Import costs had risen by as much as 25 per cent, Mr. Clarke said. Trying to plan ahead or to price products had now become almost impossible.
"To the man in the street the bottom line is higher prices," economist Dr. Omrie Evans stated. He said the impulse to higher prices will be made greater by the recently announced increase in General Consumption Tax and the imposition of a cess on imports.
"I expect to see the impact in inflation as the year progresses," said Steven Bruce-Miller, trading manager at Jamaica Money Market Brokers. He said that if the current rate of decline in the value of the currency is maintained for the rest of the year, the inflationary results would be "frightening."
Gasoline prices, electricity bills and transportation costs are the areas which are most likely to be directly impacted by the devaluation, Mr. Bruce-Miller said. He added that "this will ripple through the economy."
According to Bruce-Miller, the actions of the Bank of Jamaica are primarily to blame. Rather than placing a long-term money market instrument to contain the demand for foreign exchange late last year, he said, the Central Bank placed a three-month instrument and has had to be intervening ineffectively in the market since.
"People just don't have any confidence in the economy," said Anya Schnoor, senior vice president at Pan Caribbean. She said the economy will be punished by the heavy taxes imposed in this year's budget, which might require even heavier taxes next year to maintain the country's economic targets.
The devaluation will cause pain for many Dr. Evans said, but it is also creating, "profitable investment opportunities in the economy for areas with high value-added products that can be exported."
