IMF Executive Board Completes Fourth Review under the Stand-By Arrangement for Jamaica

November 5, 2018

  • Program implementation remains strong 5 years into the authorities’ economic reforms.
  • Structural impediments need to be quickly addressed to foster private capital formation and accelerate growth and job creation.
  • Modernizing the central bank will help facilitate the needed move to full-fledged inflation targeting.

On November 5, 2018, the Executive Board of the International Monetary Fund (IMF) completed the fourth review of Jamaica’s performance under the program supported by the Stand-By Arrangement (SBA). The 36-month SBA, with a total access of SDR 1,195.3 million (about US$ 1.66 billion), equivalent to 312 percent of Jamaica’s quota in the IMF, was approved by the IMF’s Executive Board on November 11, 2016 (see Press Release No.16/503). The Jamaican authorities continue to view the SBA as precautionary, an insurance policy against unforeseen economic shocks that could lead to a balance of payments need.

Following the Executive Board’s discussion today, Mr. Tao Zhang Deputy Managing Director and Acting Chair issued the following statement:

“The authorities continue their impressive track record under the Stand-By Arrangement. While macroeconomic stability is entrenched, with reduced public debt and improving social and unemployment indicators, growth remains subdued. Against this backdrop, supply-side reforms to facilitate private sector investment are needed to achieve higher, sustained growth and job creation.

“The Bank of Jamaica (BOJ) remains committed to maintaining inflation within the 4-6 percent target range over the medium term. The recent tabling in Parliament of legislation to upgrade the BOJ Act is an important step toward the eventual shift toward full-fledged inflation targeting. Maintaining exchange rate flexibility and limiting FX sales during periods of disorderly market conditions is necessary to support an inflation targeting framework. The authorities are also planning to accelerate FX market development and the building of technical capacity in monetary operations.

“The public-sector wage bill needs to be placed on a sustained downward path. Reduced wage outlays will allow the government to reprioritize public spending toward security, social assistance, and growth-enhancing capital expenditure. Achieving such a wage bill reduction will require a broad overhaul of the public compensation and allowance system and a reduction in the size of the government workforce.

“The financial sector should be further strengthened in line with the recommendations from the accompanying Financial Sector Stability Assessment. Priority should be placed on enhancing coordination, data collection, monitoring, and strengthening technical capacity of the financial regulators. Improving consolidated and risk-based supervision are important reform areas. Addressing impediments that constrain access to finance would help support private-sector investment.


Table 1. Jamaica: Selected Economic Indicators 1/

Population (2013): 2.8 million

Per capita GDP (2014): US$4955

Quota (current; millions SDRs/% of total): 382.9/0.08%

Literacy rate (2015)/Poverty rate (2016): 87%/17.1%

Main products: Alumina, tourism, chemicals, mineral fuels, bauxite, coffee, sugar

Unemployment rate (Apr. 2018): 9.7%

Prog.

Projections

2014/15

2015/16

2016/17

2017/18

2018/19

2018/19

2019/20

2020/21

2021/22

2022/23

(Annual percent change, unless otherwise indicated)

GDP and prices

Real GDP

0.2

1.0

1.4

0.9

1.7

1.4

1.6

1.8

2.1

2.2

Nominal GDP

7.2

7.7

5.9

8.1

6.8

5.5

7.1

6.9

7.2

7.3

Consumer price index (end of period)

4.0

3.0

4.1

4.0

5.0

4.7

5.1

5.0

5.0

5.0

Consumer price index (average)

7.2

3.4

2.4

4.6

5.0

3.7

5.5

5.0

5.0

5.0

Exchange rate (end of period, J$/US$)

115.0

122.0

128.7

126.0

…

…

…

…

…

…

Exchange rate (average, J$/US$)

113.1

118.8

127.3

127.9

…

…

…

…

…

…

Nominal depreciation (+), end-of-period

5.0

6.1

5.4

-2.1

…

…

…

…

…

…

End-of-period REER (appreciation +) (new methodology) 2/

-0.2

-2.4

-2.6

3.2

…

…

…

…

…

…

Treasury bill rate (end-of-period, percent)

7.0

5.8

6.3

5.1

…

…

…

…

…

…

Treasury bill rate (average, percent)

7.8

6.3

6.1

5.1

…

…

…

…

…

…

Unemployment rate (percent) 3/

14.2

13.3

12.7

9.7

…

…

…

…

…

…

(In percent of GDP)

Government operations

Budgetary revenue

26.3

27.0

27.9

29.0

29.3

29.8

28.9

28.6

28.5

28.3

Of which: Tax revenue 4/

23.6

24.5

25.7

25.7

25.8

25.9

25.4

25.3

25.3

25.3

Budgetary expenditure

26.7

27.3

28.1

28.6

29.5

29.6

28.1

27.9

27.4

26.8

Primary expenditure

18.8

19.8

20.3

21.6

22.4

22.8

22.0

22.1

22.0

21.8

Of which: Wages and salaries

9.5

9.7

9.3

9.2

9.2

9.1

9.1

9.0

8.8

8.8

Interest payments

8.0

7.4

7.8

7.0

7.1

6.8

6.2

5.8

5.4

5.0

Budget balance

-0.5

-0.3

-0.2

0.5

-0.2

0.2

0.8

0.7

1.1

1.5

Of which: Central government primary balance

7.5

7.2

7.6

7.4

7.0

7.0

7.0

6.5

6.5

6.5

Public entities balance 8/

0.9

1.8

2.0

0.6

0.0

0.0

0.0

0.0

0.0

0.0

Public sector balance

0.4

1.6

1.5

1.1

-0.2

0.2

0.8

0.7

1.1

1.5

Public debt (FRL definition) 4/ 6/

…

…

115.1

102.2

98.3

99.6

93.6

88.3

82.1

75.8

Public debt (EFF definition) 5/ 7/

139.7

121.3

121.8

109.1

104.8

105.8

99.0

92.7

85.2

77.7

External sector

Current account balance

-7.0

-2.0

-2.6

-5.4

-3.0

-5.0

-4.0

-3.7

-3.6

-3.5

Of which: Exports of goods, f.o.b.

10.2

8.3

8.8

9.2

10.4

10.8

11.2

11.1

10.8

10.5

Exports of services

15.5

14.8

15.8

14.2

14.5

14.5

15.3

15.7

15.4

15.1

Of which: Imports of goods, f.o.b.

36.4

30.0

31.5

34.9

33.2

36.9

36.6

35.9

35.4

35.0

Imports of services

19.8

19.5

21.4

20.6

21.1

21.1

23.0

24.1

24.0

23.8

Net international reserves (US$ millions)

2,294

2,416

2,769

3,075

3,219

2,965

3,168

3,221

3,229

3,426

of which: non-borrowed

1,335

1,470

1,944

2,398

2,428

2,454

2,820

2,887

3,065

3,295

(Changes in percent of beginning of period broad money)

Money and credit

Net foreign assets

27.9

10.1

7.1

5.5

4.7

2.8

5.5

2.6

2.0

5.3

Net domestic assets

-22.3

8.6

15.4

2.6

2.1

2.7

1.6

4.3

5.3

2.1

Of which: Credit to the private sector

3.1

8.2

22.4

9.0

9.5

7.8

8.4

8.8

9.9

11.6

Of which: Credit to the central government

-15.2

5.5

0.4

2.8

5.2

2.8

0.0

-2.1

0.6

0.1

Broad money

5.7

18.7

22.5

8.1

6.8

5.5

7.1

6.9

7.2

7.3

Memorandum item:

Nominal GDP (J$ billions)

1,568

1,688

1,789

1,933

2,016

2,039

2,184

2,334

2,503

2,687

Sources: Jamaican authorities; and Fund staff estimates and projections.

1/ Fiscal years run from April 1 to March 31. Authorities' budgets presented according to IMF definitions.

2/ The new methodology uses trade weights for Jamaica that also incorporate trade in services especially tourism.

3/ As of January 31.

4/ Consolidated central government and public bodies' debt, consistent with the Fiscal Responsibility Law. The most significant deviation from the EFF definition is the exclusion of debt to the IMF held by the BoJ.

5/ Central government direct debt, guaranteed debt, and debt holdings by PCDF, consistent with the definition used under the EFF approved in 2013

6/ Consistent with the Fiscal Responsibility Law (FRL), implementation of the FRL-consistent debt definition began in FY16/17. A backward series is not available since consistent data on public bodies' debt holdings is not available prior to FY16/17.

7/ The decrease in debt in FY15/16 partly reflects the PetroCaribe buyback operation that generated an immediate 10 percentage point reduction in debt. The increase in debt in FY16/17 partly reflects prefinancing for FY17/18 maturities.

8/ Projections for 18/19 reflect the special distribution from PCDF to Central Government, ahead of its reintegration by end 18/19.

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MEDIA RELATIONS

PRESS OFFICER: Randa Elnagar

Phone: +1 202 623-7100Email: MEDIA@IMF.org