Dear Editor,

In a recent Bank of Jamaica (BOJ) press briefing, held on May 20, 2020, Governor Richard Byles informed the country that projected interventions in the foreign exchange market for the rest of the year could amount to over US$1 billion. This should not cause any major alarm to any players in the foreign exchange market in that the net international reserves (NIR) have been building up over the period 2014 to December 2019 for situations such as this.

Also, our major earners of foreign exchange have either dried up in the case of the tourist industry or earners such as bauxite and remittances have experienced significant reductions in earning.

This is not the first time we will be experiencing a significant reduction in the NIR due to adverse elements in the market environment. The calendar years 2012 to 2013 saw significant reductions in the NIR. The NIR ended the year 2011 at US$1,967.01 billion. This was reduced by over 42 per cent to US$1,132.79 billion in 2012 and further to US $1,047.83 billion by December 2013. Taking a 10-year average (2010 to 2019) of the NIR, this would work out to about US $2.285 billion per year. This would be within the projected decline in the NIR for this year.

Governor Byles and the team at the BOJ, no country has demonstrated full anticipation of the novel coronavirus pandemic. Navigating this economic and health and wellness shock, however, will take very bold and pragmatic leadership, especially from our central bank. This should entail a more proactive approach to market elements. Messages that lack surety of protecting the value of the Jamaican currency will not help to build confidence, but will be sure to fuel even more speculations and further depreciation.

Finally, let us remove the focus from speculation in the foreign exchange market. These are basic elements of any floating exchange rate system. The central bank can, however, minimise such influence by being close to the market, understanding the messages it send and taking proactive approaches in defusing panic.

Michael Clarke

Greater Portmore

St Catherine

mm2clarke@yahoo.com