DaviesDuring the course of last week the Jamaican dollar underwent a precipitous slide that saw it lose more than $11 in value in five days to its United States counterpart. It started the week at the $61.30 mark and closed on Friday with a sell rate as high as $72.50. The Canadian dollar is now selling as high as $51.53 with the British Pound hitting $116.
Some people level the blame at the feet of the dealers and speculators others point to the lack of confidence in the economy brought on by the Minister of Finance's budget presentation. While the rapid depreciation in the local dollar was taking place, the Minister of Finance and Planning, Dr. Omar Davies was in Washing-ton. On his return to the island last Thursday, he issued a response to the slide of the dollar through the Ministry of Finance. Below is the statement:
THE RECENT rapid movements in the exchange rate and speculation about my trip to North America, have given rise to concerns about the state of the economy. This has been fuelled by speculative statements from a number of commentators. These statements have heightened these concerns even more.
It is my intention to deal with these issues in a full report to Parliament. However, I feel it necessary to speak directly to the population ahead of this fuller comment with a view to allaying some of these concerns.
Let me emphasise that my visit to Washington D.C. and New York was not about fund-raising. As I said in my Budget Speech I would visit the International Financial Institutions (IFIs), and the U.S. Treasury to discuss an appropriate replacement to the Staff Monitored Programme (SMP) and brief them about recent economic developments in Jamaica, and the Budget. In New York I also met with the two rating agencies, three large investment banks and a group of investors in our bonds.
The discussions with the IMF centred around a suitable replacement for the SMP.
I met with the highest level of officials available in these institutions and the talks went very well, as I indicated in a statement released over the weekend. We are currently working with the IMF and the other IFIs to bring to fruition these discussions.
While we did not go seeking funding from the other IFIs, they have reconfirmed their commitment to project financing and have indicated a willingness to consider some sort of budgetary support.
In terms of the external capital markets, we met with three senior international bankers and some of the larger investors in the Jamaica Government bonds. We provided them with a brief as to recent developments over the first quarter of 2003 in the Jamaican economy. We indicated that the real sector grew by 3.4 per cent in the first quarter of the calendar year.
The Jamaica Bankers Association sought a meeting with the Ministry of Finance, Bank of Jamaica and the Planning Institute of Jamaica, and the Financial Services Com-mission today, and had wide-ranging discussions on developments in the foreign exchange market and the general state of the economy.
This was fuelled by concerns that the Jamaican Government might not be able to meet its fiscal target, among other things. I assured them that the Government will be meeting its fiscal target and will do whatever is necessary to meet this target.
A number of steps were agreed to facilitate greater stability in the market. I was heartened by the concern and positive commitment given by the Bankers to work with the Government in an effort to bring calm and stability to the foreign exchange market. At the end of the day there was strong recognition that instability brings greater harm to all sectors of the Jamaican economy. The Government is confident that working together with all segments of the population, will facilitate the return of stability to the foreign exchange market.
