Kingston
An official of the International Monetary Fund (IMF) says the organization welcomes the recent devaluation of the Jamaican dollar.
Jan Kees Martijn who led an IMF staff mission to island for a routine visit, which is currently underway, said in Kingston today that the devaluation was an important correction.
The Jamaican dollar has depreciated more than 11 per cent in the past 12 months.
In its request for an Extended Fund Facility, Jamaica told the IMF that it's external position has deteriorated significantly, with the current account deficit estimated to have remained very large at around 12 per cent of GDP.
Government officials also told the IMF that sluggish foreign inflows, including from multilateral institutions, together with central bank foreign exchange sales and debt service payments, contributed to a sharp drop in NIR to below US$0.9 billion, compared to US$1.9 billion at end-2011.
They said that as part of a move to address the problem, "the exchange rate has been allowed to depreciate."
"A flexible exchange rate regime should play a central role in Jamaica’s macroeconomics policy framework and its structural agenda going forward," Jamaica has said in documents published by the IMF.
The technical documents, which provides the basis for the IMF agreement, says "the recent nominal exchange rate depreciation has been useful, by reversing part of the overvaluation of the real exchange rate that has emerged in recent years, thus supporting price competitiveness".
The country also said there may still be a need, at times, for interventions in the foreign exchange market aimed at avoiding disorderly short-run movements.
In this context, the program contains clear reserve targets to safeguard the adequacy of reserve coverage – a key policy priority under the programme.
