As the Jamaica dollar continues to slide against the Greenback, the Bank of Jamaica has made moves to pump millions of dollars into the foreign exchange market over the last two weeks to shore up the local currency in order to brace its rapid descent.

Last week the Bank of Jamaica injected some US$90 million as the Jamaican dollar got closer to the  US$160 mark,

Compounding matters are the fall off in remittances and travel advisories imposed by both the United States and Canada as a result of murder and criminal activity in Jamaica.. Both the United States and Canada are large source markets for tourists and the respective governments have warned their citizens to stay away from the crime-plagued island.

With over US$5 billion in Net International Reserves, Jamaica is well equipped to prop up the local dollar as it rides out this rough patch.

The precipitous decline of the Jamaican dollar is particularly worrisome given the country’s reliance on imports and an oil bill of over US$2 billion a year.

Jamaica has a high dependency on imports, particularly for food. Its spending on imports from January to May 2024, came to US$3 billion. Last year, Jamaica’s trade deficit was around US$5.75 billion.

The country has done a good job of containing inflation during a high interest rate environment while bolstering its foreign exchange reserves. It now has to focus on growing the economy and reducing imports which puts pressure on the Jamaican dollar.

The economy is expected to grow by just 1 per cent next year.

Of Jamaica, the World Bank observed: “ Prudent macroeconomic management anchored in debt reduction targets and inflation-targeting monetary policy with ample foreign reserves facilitated post-pandemic recovery amid the challenging external environment of inflationary pressures and tightening global financial conditions.

“However, financial consolidation adversely affects growth while relatively high debt-service costs crowd out other government spending including capital investment which is critical to boost growth. Jamaica has been among the slowest growing economies in LAC given its concentration in low productivity services, limited technology adoption and innovation, a weak business environment, high connectivity costs and pervasive crime. 

“Jamaica is highly vulnerable to external shocks given its reliance on imports and tourism. “

On October 9th, 2024, the US dollar closed trading at J$159.07, an all-time low for Jamaica.

Today the US dollar traded at J$158.79