Statement by an IMF Mission to JamaicaPress Release No. 10/453
November 22, 2010
Mr. Trevor Alleyne, head of the IMF mission to Jamaica, issued the following statement today in Kingston:
“An IMF team visited Kingston during November 9–19 to conduct the third review of the economic program under the Stand-By Arrangement (SBA) approved by the Fund’s Executive Board on February 4, 2010. The focus of the mission was to assess the quantitative performance at end-September 2010 under the SBA; review the ongoing macroeconomic and structural policies; and examine the prospects for the remainder of the fiscal year. The team met with the Prime Minister Hon. Bruce Golding, the Minister of Finance Hon. Audley Shaw, Bank of Jamaica Governor Brian Wynter, Financial Secretary Wesley Hughes, and senior officials and thanks the authorities and technical staff for their excellent cooperation.
“All end-September quantitative performance targets under the SBA were met. The central government primary surplus came in slightly above target with revenues broadly in line with projections and primary spending contained below program projections. The deficit of the public entities was significantly smaller than projected. Net International Reserves substantially surpassed the end-September target. Performance related to the structural benchmarks was mixed.
“Notwithstanding the overall good program performance through end-September, risks related to spending overruns have emerged. However, the authorities have made good progress in identifying a series of corrective measures, which will be included in the upcoming Supplementary budget.
“Some unbudgeted spending needed to be accommodated. Given the extraordinary nature of the flood damage associated with Tropical Storm Nicole, the mission agreed that it would be appropriate to relax the primary surplus fiscal target for FY2010/11 by 0.3 percent of GDP (subject to approval by the IMF Board), in addition to the previous relaxation of 0.4 percent of GDP introduced in the second review.
“Economic growth for the fiscal year 2010/11 has been revised downward to about -0.5 percent, reflecting the impact of lower than projected growth in Jamaica’s major trading partners, and the negative impacts of Tropical Storm Nicole and crime disturbances. This is a worrisome trend, given that unemployment and poverty rates are high.
“The mission discussed macroeconomic reforms that could help spur growth, including in tax policy; the environment for doing business; and expenditure management, to secure the fiscal space for priority social and infrastructure projects. Financial market conditions remain broadly positive. Interest rates on government securities have continued to fall but bank lending rates, while also declining, remain high. Credit growth remains stagnant. Inflation pressures continue to abate, allowing the central bank to appropriately relax monetary conditions.
“The authorities have reiterated their strong commitment to the program’s policies and objectives, which aim at correcting long standing economic distortions and structural imbalances. They are updating a draft Letter of Intent (LOI), to include measures to address the spending overruns. We will remain in close contact, and a mission is expected to return to Jamaica to complete discussions on the LOI as soon as this task is completed.”