The Opposition Jamaica Labour Party today called on the Government of Jamaica to take firm action to halt the continuing precipitous slide in the exchange rate which has now reached the psychologically devastating threshold of over J$100.00 to US$1.00.
In making the call, Opposition spokesman on Finance, Planning, Growth and Economic Development, Audley Shaw, said that now that the dust has settled since the new IMF Agreement, the new round of devaluation which is now taking place indicates that confidence in the Government’s management of the economy has not returned among the critical stakeholders in the foreign exchange market.
Mr. Shaw said that despite the injection of over US$200 million at the BOJ and US$90 million in direct budgetary support from the IMF, the dollar continues to slide although we are not even in a peak season of demand for foreign currency. Equally, the Net International Reserves still remains well below the US$1.0 billion level, which is also a critical benchmark figure.
Mr. Shaw also noted that despite pledges made by other multilateral institutions, there are no signs that can lead to an expectation of any significant early draw-downs from these institutions, as these disbursements will depend largely on the institutional capacity of the Finance Ministry to fulfil the requirements for qualification for these funds.
Mr. Shaw said that the Government must now stop ‘fiddling while Rome burns’ and take firm, decisive steps that can build investor and stakeholder confidence, halt the slide in the exchange rate and its negative consequences for increased cost of living, and programme a sustained period of stability and predictability that will lead to economic growth, revenue growth and job creation.
Mr. Shaw recommended the following measures that can help to restore investor confidence:
1. Open immediate and urgent dialogue with the critical stakeholders in the foreign exchange market seeking their support to temporarily fix the exchange rate at the existing level or close to it.
2. Carry out an urgent review of recently imposed tax measures that are hostile to the productive sector, and consider specifically the rollback of the increase in Transfer Tax and Stamp Duties, abolish the Dividend Tax and abolish all taxes on raw materials and capital goods for the Productive Sector.
3. Ramp-up the retooling programme for energy efficiency with low cost loans and grants.
4. Ramp-up the small business investment promotion programme by fast-tracking access to credit and micro-financing; and
5. Fast-track the programme of accessing low cost loans and grants from the IDB, the World Bank and the European Union.
Mr. Shaw said that these are minimum requirements that must be implemented by Government to restore confidence and get the economy growing again.
Mr. Shaw further stated that the gravity of the situation requires the intervention of the Prime Minister and warned against an over-reliance on the IMF Agreement as a substitute for the sensible, practical action that is needed from the Government.
Mr. Shaw said that this situation must be considered as urgent as these new developments in the economy reveals the fragility of the recently concluded IMF Agreement.