Press Release: Statement by the IMF Mission at the Conclusion of the 2008 Article IV Discussion with Jamaica
March 14, 2008Press Release No. 08/53
An International Monetary Fund (IMF) mission headed by Sanjaya Panth, Division Chief in the IMF's Western Hemisphere Department, issued the following press release today at the end of its discussions in Kingston:
"During the past two weeks, as part of its annual Article IV consultation, an IMF team met with government officials, the opposition, and private sector representatives to review recent economic and financial developments and to discuss economic prospects and policies. The discussions focused on the new government's economic program aimed at strengthening macroeconomic stability and increasing growth.
"Jamaica has weathered a series of adverse exogenous shocks in recent months. Hurricane Dean, heavy rains, and sharp increases in global food and oil prices have all exacted tolls on the economy: a decline in real economic growth to an estimated 1¼ percent in 2007, increase in inflation to 17 percent at year-end, and a widening of the external current account deficit to 15-16 percent of GDP this fiscal year. Moreover, this confluence of shocks, an upward revision of the fiscal deficit, and ongoing turbulence in global credit markets, led local financial markets to become somewhat unsettled. International reserves have fallen to US$2 billion from US$2.3 billion in March 2007.
"The steps taken by the Bank of Jamaica (BOJ) to stem capital outflows, contain pressures in the foreign exchange market, and address rising inflation are encouraging. In particular, the consecutive interest rate increases early in 2008 have helped moderate pressures and demonstrate the willingness of the BOJ to take action as appropriate.
"The new government's medium-term agenda to address Jamaica's longstanding twin challenges of low growth and high debt is welcome. The authorities intend to balance the budget over a three-year period, which will go a long way to reducing public debt, and in turn, encourage investment and improve growth. The authorities' long-term plans to improve the business climate by simplifying investment procedures, increasing public sector efficiency and reforming the tax system are also well-placed.
"The mission discussed with the authorities the desirability of making a strong start with their medium-term program. In the mission's view, aiming for an improved primary surplus in FY 2008/09 over FY 2007/08 will help make early inroads at debt reduction, enhance credibility overall, and assist the BOJ maintain stability and safeguard reserves.
"Continuing to strengthen the financial sector and financial stability will be an important element of the forward-looking agenda. Key in this respect is enhancing supervision over non-bank financial institutions and continuing steps to address unregulated investment schemes promising abnormally high rates of return and not in the public interest."