Minister without Portfolio in the Ministry of Finance and the Public Service, Fayval Williams says the increase in local demand for the US dollar in recent weeks, has resulted in further depreciation in the value of the Jamaican dollar against its counterpart.
The Bank of Jamaica’s website indicated that the rate stood at J$133 to US$1 on Wednesday.
Businesses purchasing more US dollars
Addressing a post-Cabinet press briefing at Jamaica House, Williams explained that more companies are looking at their debt structures and purchasing US dollars to service these, as interest rates in the local market decrease.
“They are looking at their debt structure because a lot of companies have US-dollar debt on their books. As rates converge in the local market, it is advantageous for them to change out those US dollar loans into Jamaican dollar loans which is excellent,” she said.
Williams explained that this move reduces a company’s risks to foreign exchange exposure, “but in executing these transactions, what actually happens is that the companies have to go into the market to buy the US dollars to repay the loans, and that causes increased demand.”
Significant increase in imports
She said another factor driving the slide in the value of the Jamaica dollar is the significant increase in imports this year, compared to 2017.
“The economy is growing. We need to import more in terms of inputs for the production process. When we look at the data, we see that mineral fuels and transport equipment, chemicals, manufactured goods and food are leading the increase in imports,” Williams said.
She said she anticipates the foreign exchange market will “work its way out.”