(Jamaica Observer) The Jamaican dollar plunged to its lowest value ever on Friday, trading at an average $100.08 to its US counterpart, a development that is in keeping with a recommendation of the International Monetary Fund (IMF).
Last month, the IMF, in its Country Report on Jamaica, said that despite a recent depreciation in the value of the Jamaican dollar, the currency was overvalued and further depreciation was needed.
“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 IMF said.
“Looking forward, and given the need to address the remaining overvaluation, structural reforms are expected to help in restoring external competitiveness, alongside exchange rate flexibility,” the fund added.
Early last month Jamaica signed off on a funding arrangement with the IMF that will see the island receiving nearly US$2 billion in loans over the next four years from the IMF, the World Bank and the Inter-American Develop-ment Bank under an Extended Fund Facility. In its country report, the IMF said that 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 programme contains clear reserve targets to safeguard the adequacy of reserve coverage — a key policy priority under the programme,” the Fund said.