Devaluation is no strategy for growth

The Editor, sir

I have been following the ongoing debate about devaluing the Jamaican dollar.  Kudos to the Caribbean Policy Research Institute (CaPRI) on hosting the forum “Jamaica $100 to US $1: A Cause for Panic or an Opportunity for Growth?”.  But, I cannot believe that devaluation is still being advocated as a strategy for growth.

                In the article titled “Devaluation Solution Persists Despite Contrary Evidence” in the Financial Gleaner of 1 March 2013, Wilberne Persaud rightly stated that: “… devaluation of the Jamaican dollar does not really deliver increased exports and decreased imports.  It did little over the years to correct incipient and chronic deficits in our balance of payments”.

For those still not convinced, Dr. Michael Witter had assessed our exchange rate policy since 1962, and presented his findings in a paper titled “Exchange Rate Policy in Jamaica: A Critical Assessment”.  His conclusion was that devaluation is insensitive to the effects of speculation by those lacking confidence in Jamaica’s productive sectors; and it does not recognize the inelastic demand for imports both for production and consumption.

                I am not advocating the fixing of the exchange rate.  Rather, I simply support the views of those quoted that devaluation is not a strategy for growth, or policy to correct balance of payment deficits.  It has been proven to be otherwise.  We need to address our lack of competitiveness by some other means.

I am, etc.

Paul Hay

Paul Hay is a Jamaican national, founder of PAUL HAY Capital Projects: a consultancy, based in Kingston Jamaica, with a vision of providing strategic planning and implementation services to organizations for non-residential facilities in the Caribbean.