Jamaica has been subjected to a lot of economic turmoil. Owing to the bearish growth of the economy the country’s economy was stagnated to a great extent. Few are of the opinion that the various policies adopted by the government to effect reforms in the country were responsible for the stagnation.
To bring about monetary reform in Jamaica the government introduced several monetary policies.
However, a healthy monetary reform should be capable enough to drive away the side effects of the following:
Speculative property rights
High tax rates.
A sound monetary reform in Jamaica should be able to bring about a sustained growth in the economy of the country. The people of Jamaica have lost faith in the Bank of Jamaica because the bank has been blamed for letting inflation percolate to higher rates. It also permitted the Jamaican currency to depreciate.
This has been happening in the last couple of years. For such reasons the creditors are reluctant in giving loans. There is another aspect to it, the lenders believe since the bank has witnessed high rates of inflation and depreciation of the Jamaican currency, there might be confusion pertaining to inflation adjustments.
Currently, Jamaica is encountering a quandary. Real interest rates pertaining to the Jamaican currency is posing a problem on one hand because of the reluctance of the lenders. On the other hand, if the rate of inflation is increased in order to decrease interest rates, the bank is being blamed for it. Under these circumstances, a policy is to be introduced, which would kindle a monetary reform in Jamaica to tame both these problems.
Finally what was being contemplated is whether the economy should be market oriented or should the economy follow a “managed monetary regime”. In case of a market oriented economy, the exchange rates float and are determined as per conditions prevailing in the market. On the other hand, a “managed monetary regime” is determined by rules set by the government.
Monetary reform in Jamaica is expected to affect the following four spheres of the Jamaican economy.
As part of the monetary reform in Jamaica, the Bank of Jamaica, withdrew limitations pertaining to convertibility. This occurred in the year 1991.
Jamaica requires a monetary reform, which takes into consideration positive as well as negative experiences from yesteryears. The country has to strike a balance between financial market globalization on one hand and framing monetary rules keeping in mind only the country on the other. In order to flourish, the country is required to facilitate global competition. If monetary reform in Jamaica does not fulfill the purpose, the country might lose out on the opportunities of availing benefits of liberalization and globalization.
In a nut shell, Jamaica ought to concentrate on the following points.
The government ought to implement monetary reform in Jamaica, which should be compatible with the latest developments of information technology.
It is required that the government should embrace policies, which are common in the international market economy.
The part played by the Central Bank ought to be enhanced so that it makes its valuable contribution to the growth of the economy.
Handling problems pertaining to the artificial creation of risks in the domestic as well as international financial markets.
The country should also realize the importance of international monetary order.
Last Updated on : 26th June 2013