With the coronavirus (COVID-19) pandemic continuing to crater the domestic economy, the Bank of Jamaica (BOJ) has already employed its B-FXITT tool three times, totalling US$65 million in just over two weeks into the new year, in order to prop up the availability of foreign exchange.

Its latest effort was last Friday, January 15, when the BOJ offered for sale US$30 million to authorised dealers and select cambios through a B-FXITT flash auction.

A week prior to that, Thursday, January 7, it engaged its B-FXITT flash intervention tool making US$20 million for allocation to eligible bidders with a settlement date of January 8.

The following day, the central bank announced an operation date with a settlement date of January 11 again with a flash intervention sale this time of US$15 million.

It is unlikely that tourism, a major driver of foreign exchange earnings in Jamaica, is likely to return to its pre-COVID levels for the foreseeable future, exacerbated by more stringent testing requirements imposed by travellers returning to the US, UK and Canada. Cruise ships have already halted coming into Jamaican ports.

COVID-19 infections are on the rise again the world over, more so in the United States, which is Jamaica’s biggest trading partner and source for tourism. The World Bank has estimated that Jamaica will lose nine per cent in real GDP terms and tourism is calculated to have taken a J$77 billion hit for 2020.

A ray of hope is remittances which have remained buoyant. For September, the latest Bank of Jamaica (BOJ) Remittances Bulletin showed net remittance inflows of US$239.2 million, up by 38.4 per cent or US$66.3 million relative to September 2019. This improvement is largely reflective of an increase in gross remittance inflows of 34.4 per cent or US$66.5 million partly offset by an increase 0.9 per cent or US$0.2 million in outflows.

The rise in remittances to Jamaica runs counter to the projections put forward initially by both the International Monetary Fund and the World Bank, which forecasted a decline in remittances across the world this year with economies contracting and a rapid increase in unemployment numbers. 

According to the BOJ Remittances Bulletin for September 2020, the increase in gross remittance inflows was driven by an increase of 39.5 per cent coming from remittance companies and 6.2 per cent rise in inflows from other remittances.

The data shows that, despite the global uncertainties caused by COVID-19, Jamaicans overseas are sending home more money for their loved ones. The Remittance Bulletin showed a 30 per cent jump in remittances for the last six months reporting period (April-September).

Net remittance inflows during this period amounted to US$1.41 billion, representing an increase of US$325.9 million relative to the previous corresponding period. This improvement emanated from a 24.9 per cent or US$305.1 million increase in remittance inflows.

This was further driven by a decrease of 15.2 per cent or US$20.8 million in outflows. The increase in inflows resulted from a growth of 28.6 per cent in remittance companies and an increase of 5.9 per cent in other remittances.

The largest source market of remittances flows to Jamaica for September 2020 was from the United States, whose share increased to 67.4 per cent, coming from the 64.8 per cent recorded for September 2019. Other source countries, which contributed a notable share of remittances for the month were Canada at 12.0 per cent, followed by the United Kingdom with 10.6 per cent and The Cayman Islands at 6.3 per cent.

When compared to other countries, Jamaica’s growth rate in remittance inflows of 17.7 per cent was higher than that of Mexico, which registered a growth rate of 11.2 per cent during the period January to September 2020. At the same time, Guatemala registered a lower growth rate of roughly 4.0 per cent while El Salvador saw a 0.8 per cent increase in its inflows.

The BOJ is anticipating a decline in the economy of between 10 to 12 for fiscal year 20/21 and has held the policy rate at 0.50 to help bolster the economy. The next policy decision is expected on February 16, 2021.

Inflation currently stands in the 6 per cent range and according to the  Jamaica Chamber of Commerce’s (JCC) third-quarter 2020 (October) report, consumer confidence is low with concerns about prospects for business recovery and by extension jobs and income.

Business confidence has declined further with firms going into long haul survival mode.

Controlling the spread of the virus is critical.