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Grave error to marginally devalue currency

Sunday, January 7, 2018

In an article that I wrote in the Guardian on December 31, the subheading for one of the topics of my article stated “It was a grave error to devalue the currency”. It should have really read, “It was a grave error to marginally devalue the currency”.

Substantively what is being said here is that the State should not have devalued the currency by seven per cent because it triggered a worsening of the current account balance. Instead, the State needs a much more pronounced devaluation in order to potentially address the current account imbalance.

Note, though, that even with a devaluation other parallel measures would be needed to help improve the current account balance. For example, the release of workers from make-work programmes could facilitate an increase in agricultural production.

Policymakers would also need to pursue an improvement in the ease of doing business index, the global competitiveness index and in those areas that could enhance the overall competitiveness of the economy and reduce infrastructural bottlenecks.

Senior economist at the University of the West Indies