Today, for our year in review series, we take a look at the progression of the exchange rate. For the year, the Jamaican dollar went from trading at $115.81 to $120.34, and the rate of depreciation from December 2014 to December 2015 was 5%. Comparatively, this rate of depreciation is lower than depreciation in years gone by, with 2014’s rate being 7.8% and 2013’s rate being a staggering 14.4%.
The first three months of the year actually saw the Jamaican dollar appreciating in value by $0.77. However, this period of appreciation was not to last, as it was followed by 9 months of depreciation. In total, from December 2014 to December 2015, the Jamaican dollar depreciated by $5.68.
Since the beginning of the IMF EFF deal in 2013, the Jamaican dollar has lost 21% of it’s value, going from trading at US$1 for J$99.45 to J$120.34. The devaluation of the Jamaican dollar over this period of course was expected, as it was a central tenet of the IMF arrangement. This policy nevertheless has had deleterious effects on the economy through building the debt stock held in foreign currency.
However, for many the expected long term effect of the policy will be positive. As such, in November, Brian Wynter, the BOJ Governor, reported that the dollar is no longer overvalued, and is less susceptible to unpredictable slippage indicating economic stability rather than cause for alarm. Nevertheless, January of 2016 has seen the dollar depreciate further to US$1:J$121, putting many on edge about the veracity of claims of stability.
With an improving macroeconomic environment, will Jamaica be able to increase productivity and output enough to reap the benefits of a weak dollar or will the negative effects on debt stock and import prices overwhelm this possibility? You can read our previous features on depreciation including To Dollarise or Not To Dollarise and Jamaican Dollar Depreciation Facts and chime in to let us know your thoughts.
Look out for the next instalment of our economic year in review feature on Wednesday.