KINSTON, Jamaica – Prime Minister Bruce Golding revealed in Parliament yesterday that the former Portia Simpson Miller administration had calculated the 2007/2008 Budget on an exchange rate of J$71 to US$1.
But former Minister of Finance, Dr. Omar Davies, said he was surprised that the Prime Minister had disclosed that information, noting that it had always been the policy of the previous administration and the relevant officials not to discuss that “for obvious reasons”.
Mr. Golding, commenting on the $16 billion expenditure that was not included in the Budget, said: “We understand that when you cast a budget that there may be changes, there may be price movements and you have to make adjustments, but we are talking about items that were left out.
“A lot has been said about price movements, a lot has been said about exchange-rate movements. I am (here) to tell this House that the current Budget, which is being pursued to March next year, was calculated on the basis of a US$71/J$1,” he disclosed.
Mr. Golding was debating a resolution to transfer nearly $3 billion from the Capital Development Fund to be used for budgetary support.
But speaking with journalists after the sitting of the House, Dr. Davies said he was cautioned by his technicians not to release information on the rate of exchange or interest rate that they had projected.
“I am quite surprised that he (Golding) did and I do not believe that he was properly advised. His financial advisors would not have suggested that that be done,” Dr. Davies contended.
He argued that if at the start of a financial year, the Government indicated the exchange rate or the interest rate on which the Budget was cast, this would have negative implications for speculation.
Commenting on the former administration’s decision to calculate the budget at J$71 to US$1, Dr. Davies said if a government projected an exchange rate that was too low, “then you would under provide, so you make an assumption and then you manage the economy during the year”.
“You would have noted in my 14 years I would never indicate several times the question was asked what is the exchange rate on which you have built the budget and I would not respond,” said Davies.
At the start of the current fiscal year in April, the Jamaican dollar traded at $67.81 to US$1. This means that the Jamaican dollar, which now trades at $71.33 to US$1 has slid by 5.19 per cent since April.