‘We are in dire straits’

Two things happened last year that threw 65-year-old Norma Clayton’s into a tailspin: her 26-year stretch as a domestic helper ended as the pandemic arrived, and her living expenses began moving out of her reach. She is now watching her savings dwindle as she tries to keep up with increasing living expenses, including the cost of food.

She is not alone. Sixty-one-year-old haulage operator Desmond Grant* also saw a shift to more unfortunate circumstances, too, when the truck he bought with a loan from the bank just months before the pandemic hit was no longer being hired for delivery jobs to hotels and restaurants.

Both are now struggling to cope amid mounting bills and the rising cost of goods and services as the depreciating Jamaican dollar impacts the spending power of citizens and profit margins of businesses.

The Jamaica dollar has been losing ground against the greenback – the benchmark US dollar – in the last 19 months, moving from J$137.80 to US$1 in January 2020 to J$155.50 to US$1 last Friday, August 13, according to Bank of Jamaica (BOJ) data.

Speaking to The Gleaner about the slide of the dollar last week, BOJ Governor Richard Byles said the movement in the exchange rate is starting to slow down.

“The exchange rate at end of July 2021 depreciated by 4.5 per cent (J$6.58), relative to July 2020. This movement was slower than the 8.3 per cent (J$11.4) that we saw for the same period in 2020, when Jamaica was starting to experience the worse effects of the pandemic,” he said.

The demand for the US dollars has been for imports and for foreign currency investments as economic activity picks up, Byles said.

“Some of the demand also reflects a desire by individuals and businesses to hold foreign currency in light of the uncertainties associated with the pandemic,” he said, noting also the fallout in foreign currency supply from tourism.

Along with the economic fallout from the current pandemic, as disrupted global supply chains and containment measures aimed at stemming the spread of the virus reduce the operating times of businesses, the depreciating Jamaican dollar has further increased operational costs and reduced competitiveness – a double whammy for many local businesses.

The Small Business Association of Jamaica (SBAJ) is now reporting that 40 per cent of the 13,000 operations islandwide – both formal and informal – that liaise with the organisation have folded, “and many are calling in to say they are on the verge of closing” since the start of the pandemic.

That is a five percentage point increase in the number of shuttered operators on what President Michael Leckie told The Sunday Gleaner last October. He noted that the current figures reflect a read of both formal paid-up members and informal operators who the SBAJ is trying to coax to formalise.

Officially, Jamaica has 425,000 micro, small and medium-size enterprises (MSMEs), according to Ministry of Industry data. But some economists estimate the number to be much higher, as 40 per cent of the economy is made up of informal businesses.

With Desmond’s haulage business wilting, he is now servicing the loan he took from the salary he gets from his regular job, as well as leaning on family financially.

“Before I started to make a profit, I started to lose because the trips have gotten less since the pandemic,” he said.

Due to retire in a few years and projecting to reach profitability by that time, Desmond’s haulage company was intended to be his new source of income. But with his customers scaling back as they, too, try to buffer the economic fallout from the pandemic, his new plan is to try and sell his truck.

“I just can’t continue. I am in terrible arrears, even though I have rescheduled with the bank. For the past few weeks, I haven’t worked a cent,” he told The Gleaner.

Normally, with five to seven trips a week at $22,00 per trip, paying his driver and sideman and loan were no challenge, “but right now, I’m not even getting one trip per day”.

None of the SBAJ members that have closed down since the start of the pandemic has been able to reopen, Leckie said. The SBAJ is now trying to “see whether or not we can have to cross-trading within the membership” to prop up some members, he said.

“It’s not just the movement of the dollar, but also the fuel cost. It has been really bad … . We are in dire straits,” he said.

Cost of imported goods main influence on consumer prices, says Byles

Economist Dennis Chung sees the impact of the sliding dollar as having a huge trickle-down effect on the common man, more so than the rate of inflation.

“The exchange rate is more a reflection of what happens in the market than inflation. Look at it from the people who have lost their jobs and people who would have seen a reduction in their salaries from last year,” Chang said.

But whatever the reason, Norma’s dollar cannot stretch as far as it used to for her to buy what she normally would with the same amount of cash weekly.

“On a Friday evening, I used to stop and buy the little necessaries. Poor people can’t buy for the whole week; you have to buy [daily]. You come this evening and you buy for tomorrow to Sunday. Little something might deh deh fi Monday,” she reasoned last Friday, adding that she is living from her savings amassed from the partner plans she joined while she was working, and from what her children give to her when they can.

But, “today you buy something for one money, and another day you go [and] is a different money that,” she bemoaned.

“Sometimes you spend like $3,000 to buy little rice, chicken, sugar and Lasco, but I can’t push supermarket trolley again. I have to just buy from next door,” she said, pointing to her neighbour’s corner shop.

But for Byles, the impact of exchange rate movements on prices is not as strong as in the past.

“We are no longer seeing the almost one-for-one impact of exchange rate movements on inflation that we saw in the past. In fact, it is much less now. The main factor that has impacted consumer prices recently is the international prices of imported commodities,” the BOJ governor said.

The central bank does not target any specific level of the exchange rate but focuses on inflation, he explained.

Norma’s shopkeeper-neighbour, 41-year-old Gairy Brown, has seen sharp movements in the price of food items and dwindling profits since the pandemic. The sliding dollar means the wholesalers who import their products pass on the increased cost of their goods to him; so he, too, has had to increase his prices.

It’s a point Leckie is also clear on.

“The largest segment in the MSME sector is really wholesale and retail, and they have to pass on the additional costs of imports,” he said.

Based in Kingston 20 for over 15 years, Gairy is no stranger to using creative tactics to gin up sales. For example, as squeeze of toothpaste goes for $30; there’s $20 worth of browning, or even more cost-effective, three sticks of matches for $5.

“The price of everything move from the pandemic start. Cup soup was scarce the other day. When it came back [on the market]. a case moved from $9,00 to $1,500. It dropped back to about $1,200,” he said.

“Right now, my daily margin cut to about $8,000. Sometimes I don’t even make that. Business gone right down. You have to dip in your little much (savings) to buy back goods and you can’t save anything,” he said.

The annual point-to-point inflation rate at June 2021, which is a measure of the extent to which cost of living in Jamaica has increased, was 4.3 per cent. “This is actually lower than the 5.7 per cent recorded at June 2020,” Byles said.

Data from the Consumer Affairs Commission point to increases in all basic food items between November 2019 to July 2021. For example, a kilogram of salt fish increased by over $200 for the period. A kilogram of sugar moved from $212 in November 2019 to $250 in July 2021.

And consumers and businesses may yet be hit with another increase by September if the island’s main power company, the Jamaica Public Service, is granted a tariff adjustment by the Office of Utilities Regulation.

tameka.gordon@gleanerjm.com