UPBEAT UNDER PRESSURE
• Jamaican dollar hits new low as remittances decline • But JMRA upbeat on outlook
AT ONE point this month, remittances flowing to Jamaica from the United States had fallen by 20 per cent. But this week, remittance companies had a bit of good news, or, in the context of the coronavirus, they had less bad news – the decline in money transfers from the US had ameliorated somewhat and is currently down by just about 10-15 per cent. Those declines, alongside the collapse of the travel and tourism markets, have led inevitably to a reduction of the foreign exchange flowing into the economy. And that shortfall in turn has resulted in a further depreciation of the local currency to fresh new lows against the US dollar, its main trading counterpart and the main currency of cross border trade. Notwithstanding the reduced supply, businesses still have to meet their liabilities, and because demand for foreign exchange has not fallen as quickly as supply the Bank of Jamaica, BOJ, intervened in the market by selling cash to its primary dealers from its holdings. “And that is helping to balance out the system,” BOJ Senior Deputy Governor John Robinson said this week. On Wednesday, April 29, the weighted average selling rate for the US dollar was $143.22, a new record high, but clawed back some its value to settle at $142.95 on Thursday. The last time, the currency hit a peak was on February 13 when it traded at $142.58, before retreating or regaining value to $134.71 on April 1. Most of Jamaica’s remittance flows come from the United States, the country most hard hit by COVID-19 with more than 60,000 deaths amid one million-plus cases, and an economy headed for recession following its contraction by 4.8 per cent in the March quarter and 30 million jobs already lost. Jacinth Hall-Tracey, president of the Jamaica Money Remitters Association, JMRA, said the impact of COVID-19 on remittance inflows is due to experiences in the main source markets, which have all been hit by the virus. Hall-Tracey says more than 60 per cent of remittances for Jamaica come from the United States, and out of that country the key corridors would include New York, a leading source of remittances. “Given that New York was so heavily impacted we have seen that the remittances to Jamaica have been reduced between 10 and 15 per cent, depending on the remittance provider in Jamaica,” said HallTracey, who is also managing director of Lasco Financial Services Limited, a listed microfinance outfit which operates a remittance business. “One of the good signs we have seen though, the impact in early April was higher than it is now. It was a high of 20 per cent reduction in early April. Now it’s a high of 15 per cent reduction,” the JMRA president said. On an annual basis, remittances to Jamaica track above US$2 billion, which is equivalent to about 16 per cent of GDP. Last year, January to December 2019, the inflows hit a new high of US$2.415 billion. On a monthly basis, remittances into Jamaica range now anywhere from US$166 million to US$232 million. As a snapshot of the breakout of the remittance flows from source markets, in the month of December the transfers from the US accounted for 63 per cent of the monthly total, 13. 5 per cent came from the United Kingdom, over 9 per cent from Canada, 8 per cent from Cayman, and the other 6 per cent from
various countries. The BOJ, which regulates the sector, is yet to report on the remittance flows for January, February and March of this year; but the central bank has been warning since Jamaica had its first coronavirus case in March that the flows would decline. The correction that the remittance companies have noted in April of this year – that is, the improvement from 20 per cent reduction in inflows to a 15 per cent reduction – is being ascribed to online platforms, a mode of executing money transfers to which Jamaicans are just becoming acculturated. Hall-Tracey said the pickup in business was due to senders using a lot more digital channels to transfer money, because of social distancing measures whereby instore queues are either reduced or eliminated to contain the spread of the virus. As for remittances from other source markets: “I have not been able to disaggregate the UK and Canada as yet because those are the smaller corridors, but the overall impact is the 10 to 15 per cent right now,” said Hall-Tracey. She noted that even under adverse economic circumstances, remittances will continue to flow, even if at lower volumes, because the senders of cash typically have family obligations ‘back home’. “If you are taking care of a family, even though the person themselves sending is in distress, the family needs to them are still paramount so they still continue to send. Sometimes they send slightly lower amounts but they do continue to send,” said the remittance association head. “What we have realised too, in a time of crisis, the number of persons in need in Jamaica increases. So what you have now is a new pool of persons entering the remittance space,” said Hall-Tracey. As such, “there is a compensating increase” money flows, she added. JMRA expects the usage of digital channels to increase, going forward, Hall-Tracey said digital channels will increase. “So each remittance company currently is at various levels of readiness to take some of their transactions digital, so that would impact the customers queuing. As the days go by each company is offering their customers more options,” she said. Remittances will recover from COVID at some point, she noted. “But the channels to receive them will go electronic,” HallTracey added. “So you may see fewer people in line over time, but it won’t mean there is less remittance,” she said. BOJ has taken steps to maintain liquidity in the financial system, both in terms of foreign exchanges and local currency, and has made a request of brokers to postpone the issue of securities denominated in foreign currency until the flows in the market can accommodate those transactions, in order to take pressure off the system.