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US Dollar notes (Photo: Daily Express)

Bank of Jamaica: Market-driven FX system working

US Dollar notes (Photo: Daily Express)

Governor of the Bank of Jamaica (BOJ) Richard Byles, while at the recent Monetary Policy update for the March 2021 quarter, said the market-driven system of foreign exchange supply is working and supporting seasonal demand.

Governor of the Bank of Jamaica Richard Byles (File photo)

 On 17 May 2021, the exchange rate was JM$150.68 to US$1, representing a depreciation of 5.6 per cent for the calendar year to date. This pace of change is below the depreciation of 11.2 per cent recorded over the same period last year, and it is consistent with the usual seasonal pattern of flows in the market.

“It is noteworthy that confidence in the market-driven foreign exchange system is such that, even in a period of economic uncertainty, flows remain strong and any business or individual in Jamaica that needs FX can access it,” Byles stated.

Above-average trading

He outlined that from the calendar year to the end of April 2021, daily purchases of US dollars by authorised dealers and cambios from end users averaged US$35.0 million, higher than the average of US$28.9 million recorded over the same period last year. 

“It is noteworthy that confidence in the market-driven foreign exchange system is such that, even in a period of economic uncertainty, flows remain strong and any business or individual in Jamaica that needs FX can access it”

— Richard Byles, governor, Bank of Jamaica

Similarly, daily sales to end users, which averaged US$28.2 million since the start of 2021, were above the average of US$25.2 million a year earlier.

Since March 2020, Governor Byles said, BOJ has purchased US$1.9 billion from the market via market surrenders, which pays GOJ debt servicing and for some energy imports. 

The central bank has also continued to intervene in the market when temporary shortfalls have been identified. Total B-FXITT flash sale operations since the onset of the crisis in March 2020 to date has amounted to US$411.0 million. 

THe Bank of Jamaica in downtown Kingston. (File photo)

Not yet out of the woods

“At end April 2021, Jamaica’s net international reserves remain healthy, amounting to US$3.3 billion,” Governor Byles asserted.

Looking forward, he said, over the next two years, BOJ projects that the current account deficit of the balance of payments will remain at sustainable levels of about three or five per cent of gross domestic product. 

This, he outlined,  is due to expectations of a partial recovery in tourism arrivals, driven in large part by successful   phased vaccination programmes in key source markets and “our assumption of careful control of community spread in Jamaica”.

An improvement in tourist arrivals should boost Jamaica’s net international reserves going forward. (File photo)

“We are not yet completely ‘out of the woods’, as there continues to be a cloud of uncertainty regarding how long this global pandemic will last,” Governor Byles noted, adding, however, that “the near-term outlook for the economy is positive”.