## 2026. The unemployment rate is at an all-time low, inflation is subdued, the financial system

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### Macroeconomic overview and program completion
- The 3-year Stand-By Arrangement (SBA) terminates shortly after conclusion of this sixth and final review; Jamaica graduates from 6½ years of continuous Fund-supported reform programs over two successive arrangements.
- Upon conclusion of this final review, Jamaica’s available credit under this SBA would equal the approved access under the arrangement of SDR 1.195 billion.
- All quantitative performance criteria, indicative targets, and the structural benchmark at end-June were met.
- Most structural policy commitments are on track; delayed reforms include:
  - public sector transformation;
  - compensation framework for public employees;
  - legislation to establish a fiscal council;
  - creating a special resolution regime for financial institutions.

### Growth, labor market, prices, and reserves
- Growth
  - Growth has been positive for 18 consecutive quarters, including 1.7 percent (y/y) in Q1 2019.
  - In FY18/19, growth is estimated to be 2 percent.
  - Growth is projected to decline to 0.8 percent in FY19/20 due to continued drought and the planned 18-24-month closure of Alpart for plant upgrades.
- Labor market
  - Unemployment rate reached 7.8 percent in April (the lowest ever).
  - Youth unemployment declined to 19.5 percent (the lowest on record).
  - Labour force participation: 64.2 (as of FY18/19 in table).
- Prices and monetary policy
  - CPI inflation averaged just above 4 percent (y/y) since May 2019 following five months below the BOJ target range of 4-6 percent.
  - Core inflation is around 2.5 percent.
  - The overnight policy rate was reduced to 0.5 percent after a 25bps cut in August, a 325bps reduction since the easing cycle began in June 2017.
  - Cash reserve requirement (CRR) for J$ deposits lowered from 12 to 7 percent in two steps this year.
- Reserves and external sector
  - Gross international reserves: 3,605 ($ millions) in FY18/19.
  - Current account deficit estimated to have declined in FY18/19 to 2.2 percent of GDP.
  - Current account deficit expected to rise to around 3 percent of GDP over the medium term.
  - Gross reserves are expected to comfortably exceed 100 percent of the IMF’s Assessment of Reserve Adequacy (ARA) metric throughout the medium term.

### Fiscal performance and public debt
- Primary balance: 7.5 percent of GDP in FY18/19.
- Tax revenue: 26.4 percent of GDP in FY18/19.
- Debt: 94.4 percent of GDP in FY18/19 (debt follows the EFF definition prior to FY16/17 and FRL definition afterwards).
- Wages and salaries: 8.9 percent of GDP in FY18/19.
- Interest expense: 6.3 percent of GDP in FY18/19.
- The government requested the Economic Programme Oversight Committee to continue monitoring macroeconomic targets and reform commitments until the fiscal council becomes fully operational.

### Financial sector oversight and market development
- Key gains achieved in oversight of financial institutions.
- Recommended next steps:
  - Enhanced group-wide supervision of financial conglomerates.
  - Improving data and analytics.
  - Better coordination among financial regulators.
  - An improved legislative framework for the resolution of financial intermediaries.
  - Further strengthening of the AML/CFT framework.
- FX market infrastructure
  - Absence of a trading platform contributed to higher realized volatility in the J$/US$ exchange rate.
  - BOJ’s reduced FX sales have affected market dynamics since the introduction of FX auctions in June 2017.
  - Dealers were asked to post exchange rates on a Bloomberg platform (limited take up).
  - A permanent technological solution to increase transparency is expected to be completed in early-2020.

### Policy discussions and reform priorities
- Main policy focus areas:
  - Building institutions and advancing fiscal reforms to safeguard and sustain economic stability and debt reduction.
  - Improving monetary operations and policy transmission.
  - Developing the FX market by enhancing pricing transparency and reducing the central bank’s footprint.
  - Bolstering financial inclusion, access to credit, and formality.
  - Developing debt and capital markets.
  - Moving to risk-based and consolidated supervision of financial conglomerates.
  - Strengthening financial institutions’ resolution regime.
- Supply-side reforms to promote inclusive growth and lower poverty:
  - Productivity-enhancing public investments in human and physical capital.
  - Strengthened governance.
  - Greater financial inclusion.
  - Prioritizing measures to combat crime.
  - Implementing policies to build resilience to natural disasters and weather fluctuations.
  - To create fiscal space for these efforts, the government will have to strengthen fiscal institutions and modernize the compensation framework for public employees.

### Risks and downside scenarios
- Overall risks are tilted to the downside.
- External risks include:
  - Sustained higher oil prices.
  - Tighter and/or volatile global financial conditions.
  - Weaker global growth that could negatively impact tourism and increase capital outflows.
- Domestic risks include:
  - Longer-than-expected shutdown at Alpart if investment upgrades are delayed.
  - Weather swings that put agriculture at risk.
  - Uncertainty linked to the future of the Petrojam refinery.
  - Capacity constraints and slow-moving resolution of structural challenges—including crime, governance, access to finance, and public sector inefficiencies—could erode public confidence and reduce medium-term growth.
- Liability management
  - GOJ conducted a liability management operation buying about US$1 billion of international bonds maturing in 2022, 2025 and 2028 and reopening US$815 million in 2045 bonds at a yield-to-maturity of 5.8 percent.
  - The buyback involved US$966 million of sovereign bonds maturing between 2022 and 2028 and an issuance of US$815 million bonds maturing 2045.

### Banking and credit conditions
- Lending rates have declined, albeit by less than the reduction in the policy rate.
- Most new lending is to households (for mortgages and personal consumption which have grown by around 30 percent from 2017Q2 to 2019Q2).
- NPLs are at a historic low: 2.4 percent of total loans.
- Loan loss provisions are high, and banks are well-capitalized.
- Anecdotal concern: smaller banks may be underwriting mortgages with high loan-to-value ratios, creating potential household debt-service vulnerabilities.

### Household indebtedness and vulnerabilities
- Mortgage and personal consumption lending expansion: around 30 percent growth from 2017Q2 to 2019Q2.
- Household interest spending shock: household interest spending could jump by 25 percent if lending rates were to return to their 10-year average.
- Mortgage Debt forms the largest portion of household debt; other categories include Installment Loans and Other Secured and Unsecured Debt.
- Household income growth is weakening, leaving some borrowers vulnerable to debt servicing risks.
- Comparative level: household indebtedness has increased but is broadly in line with EM peers.

### Monetary policy, liquidity, and transmission
- BOJ cut the policy rate by 25bps in August to support credit creation, entrench inflation within the target range, and fend off looming global risks.
- Given rising and high levels of excess reserves held by banks, and existing monetary and fiscal stimulus, a pause in further policy rate cuts is appropriate.
- Staff forecasts suggest that, at current policy rates, the balance of risks is for inflation to be below the mid-point of the target range over the next 2 years.
- Recommended BOJ stance and tools:
  - Maintain rates at current levels, communicate an easing bias while inflation remains below the mid-point, and be prepared to use both policy rates and reserve requirements if the inflation outlook weakens further.
  - Strengthen monetary transmission through regulatory and market reforms, including:
    - Introducing a monthly averaging of reserve requirements.
    - Replacing the liquid asset ratio requirement with a Liquidity Coverage Ratio (LCR).
    - Developing domestic debt markets to meet demand for liquid assets and improve primary dealer system efficiency.
- Excess liquidity indicator: Commercial Bank Excess Liquidity to Total Liquidity (three months rolling average) has risen.

### Fiscal and program performance (selected numerical outcomes)
- Program performance: all end-June quantitative performance criteria and indicative targets were met.
- Primary surplus: exceeded the program target by about J$19 billion (0.9 percent of GDP), buoyed by GCT and international trade taxes.
- Non-borrowed reserves: US$385 million above the end-June target.
- FY2019/20 budget: supplementary budget maintains the primary surplus target of 6.5 percent.
- Public debt: remains high at 94 percent of GDP; fiscal objective is to achieve the debt target of 60 percent of GDP by FY25/26.

### Public bodies, governance, and public financial management (PFM)
- Delays in tabling legislation to establish a fiscal council and a special resolution regime for financial institutions due to stakeholder and capacity constraints.
- GOJ signed a Memorandum of Understanding with the Economic Programme Oversight Committee (EPOC) to monitor progress.
- Operations and governance of public bodies: pending regulations to improve nomination, selection and appointment to boards of public bodies.
- Petrojam options (staff assessment):
  - (i) Keep the refinery open but replace the Customs Administration Fee (CAF) margin and ad-hoc price adjustments with a transparent direct budget transfer to Petrojam.
  - (ii) Divest the refinery, deciding whether to retain or phase out the CAF margin and ad-hoc price adjustments.
  - (iii) Close the refinery (may have one-off growth and modest job effects).
  - Minimum requirement for any action: enhance transparency by establishing automatic pricing reflecting import prices, record any implicit fiscal transfer transparently on-budget, and include a sunset date.
- PFM improvements to continue:
  - Revenue authorities should complete risk-based audits and prevent tax leaks from Special Economic Zones.
  - Closure of commercial bank accounts: 644 out of over 3000 accounts closed since June 2019.
  - Public sector transformation: 16 additional public bodies have been merged or closed; overall pace remains slow.

### FX intervention and exchange rate policy
- Central bank FX market purchases should be governed by reserve accumulation objectives, undertaken transparently, in small amounts, and through regular auctions that minimize the impact on the currency.
- FX intervention should be limited to flash auctions when there are clear disruptions in market functioning.
- Exchange rate flexibility should be maintained; FX sales by the central bank should be confined to providing liquidity in times of disorderly market conditions.
- BOJ recommendations:
  - Continue to scale back its footprint in the FX market.
  - Oversee implementation of the global FX code of conduct.
  - Aim for public entities to purchase their FX needs in the market while progressively lowering FX surrender requirements.
  - Facilitate sequencing and development of an FX forwards market and introduce prudential regulations limiting FX net open positions.

### Enhancing resilience of the financial sector and AML/CFT
- Immediate priorities:
  - Build capacity to undertake risk-based, consolidated supervision of financial conglomerates; better coordination between BOJ and FSC required.
  - Finalize comprehensive legislation for a Special Resolution Regime with (i) an administrative resolution regime, (ii) a specialized insolvency framework, and (iii) funding modalities.
  - Strengthen AML/CFT regime by implementing CFATF 2017 Mutual Evaluation Report recommendations including:
    - (i) completing a second National AML/CFT Risk Assessment;
    - (ii) improving coordination across relevant agencies;
    - (iii) passing key legislative amendments to the Proceeds of Crime Act and Terrorism Prevention Act (submission to Parliament is expected before end-year).

### Data issues and SDDS
- Jamaica is close to meeting Special Data Dissemination Standards (SDDS) subscription requirements; outstanding publications include a production index, data on wages and earnings, and general government operations, which may be feasible in 2020.
- Need to strengthen data quality and timeliness:
  - Recent large revisions to current account data highlight need for better collection and coordination among data providers.
  - BOJ should upgrade capacity and statistical methods to align with the 2016 Monetary and Financial Statistics Manual and Compilation Guide.
  - Improve STATIN’s capacity, including routine publication of quarterly expenditure GDP figures.
  - Ministry of Finance should consider fully upgrading Government Financial Statistics from the 1986 and 2001 standards.

### Program modalities, debt service projections, and staff appraisal
- The program is fully financed and Jamaica’s capacity to repay the Fund is adequate.
- Under a downside scenario with a fully drawn SBA, debt service would peak in 2023 at 19 percent of exports of goods and services (7 percent of GDP).
- If undrawn, debt service would peak at 3.5 percent of exports (1 percent of GDP).
- Staff appraisal highlights:
  - Achievements: Public debt has fallen dramatically; unemployment at an all-time low; current account deficit and inflation are subdued; FX reserves are comfortable; improved oversight of the financial system.
  - Ongoing priorities: lift growth above recent averages; poverty remains high; on-track to meet 60 percent of GDP debt target by FY25/26; monetary policy geared toward bringing inflation to the mid-point of BOJ’s target band.

### Multiple Currency Practice (MCP) and program reviews
- Staff supports authorities’ request to approve retention of the multiple currency practice (MCP).
- IMF’s Executive Board approved temporary retention until November 4, 2019 for non-BOP reasons; staff recommends MCP retention for an additional 12-month period from the date of the decision to complete the review.
- Staff supports completion of the sixth review under the SBA.
- Next Article IV under the 24-month cycle is planned for March 2020, after which staff recommends returning to a standard 12-month Article IV cycle.

### Box 1 — Promoting Inclusive Growth: key constraints and illustrative gains
- Structural rigidities constraining growth include crime, low financial inclusion, poor infrastructure, weak governance, and vulnerability to weather-related events.
- Violent crime:
  - Jamaica’s homicide rate is one of the highest in the world.
  - Staff calculations point to a significant growth payoff (of around 0.5 percent) from lowering crime to the world average.
- Education and child attendance:
  - Ancillary schooling costs can add up to 40 percent of the per capita consumption of a poor household.
  - Only three-quarters of children in the bottom income quintile attended at least 19 days of school per month (compared to 94 percent in the top quintile).
  - Scope to expand PATH coverage and allocate resources for educational costs of PATH-eligible households.
- SME finance:
  - The 2017 IFC Enterprise Finance Gap database suggests unmet demand for credit by both formal and informal SMEs is around 20 percent of GDP.
  - Financing constraints for Jamaican SMEs are around 18ppts higher than the Caribbean average.
  - Closing the SME financing gap identified by the IFC could raise medium-term growth by 0.5 percent.
- Agriculture:
  - Nearly two-thirds of Jamaica’s smaller land parcels remain untitled, limiting farmers' ability to pledge land as collateral.
  - Investments in rural road networks, irrigation, water delivery, storage, and modern farming practices would improve resilience and productivity.

### Box 2 — Fuel Pricing Mechanism: findings, scenarios, and indicators
- Retail fuel prices in Jamaica are higher than most countries in the Central American and Caribbean regions by about 16-30 percent on average.
- Petrojam is the price maker; the refinery billing price (RBP) is based on import crude prices at Cost, Insurance and Freight (CIF) plus taxes, terminal and rack fees, and an ad-hoc adjustment factor.
- During FY2014-18, the average price differential between pre-tax sales price and CIF cost for gasoline was about US$16 per barrel.
- Refining-related price differentials and margins:
  - A Custom Administration Fee (CAF) equivalent margin of about J$3.1 per liter contributed to price differentials.
  - An ad-hoc smoothing scheme exceeded zero over time and contributed up to half of Petrojam’s gross margin during FY2014-18.
  - Absent the ad-hoc adjustments, Petrojam’s average net loss could be about US$10 million rather than a profit of US$36 million per year during FY2014-18.
- Two illustrative pricing scenarios for auto diesel:
  - Scenario 1 keeps the CAF equivalent margin; Scenario 2 phases it out.
  - Both apply a 3-month moving average (MA) on global crude oil prices and reduce the ad-hoc adjustment component by half.
- Selected indicators (average over 2014-18):
  - Retail diesel fuel prices: Complete pass-through 133; Historical actual level 133; Scenario 1 129; Scenario 2 120.
  - Standard deviation: Complete pass-through 24; Historical actual level 17; Scenario 1 16; Scenario 2 15.
  - Coefficient of variation: Complete pass-through 0.3; Historical actual level 0.1; Scenario 1 0.1; Scenario 2 0.1.
  - Absolute average monthly change: Complete pass-through 6.6; Historical actual level 2.7; Scenario 1 2.6; Scenario 2 2.8.
  - Largest rise in single month: Complete pass-through 21.9; Historical actual level 15.0; Scenario 1 14.0; Scenario 2 14.1.
  - Largest cumulative rise in 3 months: Complete pass-through 32.0; Historical actual level 17.9; Scenario 1 17.5; Scenario 2 17.4.
  - Petrojam profitability relative to actual historical levels (in percent): Historical actual level n.a.; Complete pass-through 100; Scenario 1 63; Scenario 2 21.
- Policy considerations:
  - Implement a transparent, automatic pricing mechanism that ensures full pass-through of global fuel prices over the medium-term while smoothing volatility and protecting fiscal revenues.
  - Specify a pricing formula linking retail prices and import costs and a timeline for updating pricing components (e.g., import cost on a monthly basis and a review every 3-5 years).
- Decomposition of profit margin at Petrojam (US$ million per year average over FY2014-18): 98, 45, 26, -19, 46, 62, 36.

### Quantitative program targets and monetary floors (selected figures preserved)
- Overall balance of the public sector (floor) (cumulative flows Apr 1–Mar 31): -41.1; -36.6; 29.; 7; -14.7; 36.8; -14.0; -14.0; 18.0; -25.0.
- Tax revenues of the central government (floor): 360.0; 360.0; 388.7; 516.0; 542.9; 115.0; 115.0; 137.4; 242.0.
- Stock of non-borrowed net international reserves (floor) (in millions of U.S. dollars): 2,200; 2,200; 2,521; 2,200; 2,634; 2,250; 2,202; 2,587; 2,300.
- Table 12. Jamaica: Indicators of Fund Credit, 2019–27 (In millions of SDRs):
  - Prospective drawings (3-year SBA)1,195.30
  - (in percent of quota)312.17
  - Amortization: 34.76 83.68 93.12 93.12 679.38 653.67 28.32 9.44 0.00
  - Interest and service charges 1/ : 8.31 31.45 29.93 28.13 21.99 8.89 0.63 0.13 0.00
  - Total debt service 1/: 43.35 134.19 140.53 136.88 714.19 663.72 30.09 10.71 1.14
  - Outstanding stock 1/: 1,640.73 1,557.04 1,463.92 1,370.80 691.43 37.76 9.44 0.00 0.00
  - (in percent of GDP) 2/: 18.68 16.84 15.05 13.42 6.45 0.34 0.08 0.00 0.00
  - Memorandum items: Exports of goods and services (US$ millions) 2/: 4,514.96 4,826.61 5,030.65.
  - GDP (US$ millions) 2/: 13,096.84 13,785.90 14,501.16 15,228.51 15,983.78 16,792.68 17,642.39 19,141.99 20,769.06.

### Appendix I — Letter of Intent: commitments, targets, and priority actions (selected)
- Government overview: GOJ under Fund-supported precautionary SBA since November 2016; public debt reduced by 50 percent of GDP—to 94 percent of GDP at end-March 2019.
- Policy commitments include:
  - Design an independent Fiscal Council to act as guardian of fiscal rules (public debt of 60 percent of GDP or less by end-March 2026).
  - Amend the BOJ Act to make price stability the cornerstone of monetary policy, supported by a flexible exchange rate and limiting FX interventions to episodes of severe market dislocations.
  - Adopt a natural disaster financing strategy by Dec-19.
  - Preserve financial sector stability by legislating a special resolution regime and implementing consolidated risk-based supervision.
  - Maintain EPOC MoU until the Fiscal Council is operational.
  - Request retention of the multiple currency practice related to the multiple-price FX auction.
- Fiscal quantitative targets (cumulative flows Apr 1–Mar 31) — Primary Balance of the Central Government (floor) (in billions of Jamaican dollars):
  - End Dec 2019: 49.6
  - End Mar 2020: 140.0
  - End Jun 2020: 18.0
  - End Sep 2020: 58.0
  - End Dec 2020: 78.0
  - End Mar 2021: 146.6
- Overall Balance of the Public Sector (floor) (in billions of Jamaican dollars):
  - End Dec 2019: -0.8
  - End Mar 2020: -6.2
  - End Jun 2020: 8.9
  - End Sep 2020: 3.3
  - End Dec 2020: 3.5
  - End Mar 2021: 5.6
- Tax Revenues of the Central Government (floor) (in billions of Jamaican dollars):
  - End Dec 2019: 355.0
  - End Mar 2020: 510.0
  - End Jun 2020: 110.0
  - End Sep 2020: 240.0
  - End Dec 2020: 350.0
  - End Mar 2021: 535.0
- Stock of non-borrowed net international reserves (floor) (in millions of U.S. dollars):
  - End Dec 2019: 2,390
  - End Mar 2020: 2,520
  - End Jun 2020: 2,560
  - End Sep 2020: 2,590
  - End Dec 2020: 2,620
  - End Mar 2021: 2,660
- Priority actions (selected timelines and agencies):
  - Submit to Parliament legislation establishing a Fiscal Council by Apr-20. — MOFPS
  - Present to Parliament the report on the Bill to amend the BOJ Act by Dec-19. — MOFP/BOJ
  - Introduce an FX market trading platform; first phase to be operational by Mar-20. — BOJ
  - Submit legislation for a Special Resolution Regime for financial institutions by Mar-21. — MOFPS/BOJ/FSC/JDIC
  - Complete merger/closure/reintegration of an additional 18 public bodies by Mar-20. — MOFPS/TIU
  - Complete divestment of Jamaica Mortgage Bank by Oct-20. — DBJ/TIU

*International Monetary Fund — Jamaica: Sixth Review under the Stand-By Arrangement (Executive Summary and RECENT DEVELOPMENTS, OUTLOOK, AND RISKS), October 16, 2019.*

### 2026. The unemployment rate is at an all-time low, inflation is subdued, the financial system

### 1jamea2019002 - 2026. The unemployment rate is at an all-time low, inflation is subdued, the financial system

### Macroeconomic overview and program completion
- The 3-year Stand-By Arrangement (SBA) terminates shortly after conclusion of this sixth and final review; Jamaica graduates from 6½ years of continuous Fund-supported reform programs over two successive arrangements.
- Macroeconomic stability has been entrenched with substantial fiscal over-performance and efforts to address structural weaknesses.
- Upon conclusion of this final review, Jamaica’s available credit under this SBA would equal the approved access under the arrangement of SDR 1.195 billion.
- All quantitative performance criteria, indicative targets, and the structural benchmark at end-June were met.
- Most structural policy commitments are on track, but some reforms (public sector transformation, compensation framework for public employees, legislation to establish a fiscal council, and creating a special resolution regime for financial institutions) have been delayed.

### Growth, labor market, prices, and reserves
- Growth:
  - Growth has been positive for 18 consecutive quarters, including 1.7 percent (y/y) in Q1 2019.
  - In FY18/19, growth is estimated to be 2 percent.
  - Growth is projected to decline to 0.8 percent in FY19/20 due to continued drought and the planned 18-24-month closure of Alpart for plant upgrades.
- Labor market:
  - Unemployment rate reached 7.8 percent in April (the lowest ever).
  - Youth unemployment declined to 19.5 percent (the lowest on record).
  - Labour force participation: 64.2 (as of FY18/19 in table).
- Prices and monetary policy:
  - CPI inflation averaged just above 4 percent (y/y) since May 2019 following five months below the BOJ target range of 4-6 percent.
  - Core inflation is around 2.5 percent.
  - The overnight policy rate was reduced to 0.5 percent after a 25bps cut in August, a 325bps reduction since the easing cycle began in June 2017.
  - Cash reserve requirement (CRR) for J$ deposits lowered from 12 to 7 percent in two steps this year.
- Reserves and external sector:
  - Gross international reserves: 3,605 ($ millions) in FY18/19 (from table).
  - Current account deficit estimated to have declined in FY18/19 to 2.2 percent of GDP.
  - Current account deficit expected to rise to around 3 percent of GDP over the medium term.
  - Gross reserves are expected to comfortably exceed 100 percent of the IMF’s Assessment of Reserve Adequacy (ARA) metric throughout the medium term.

### Fiscal performance and public debt
- Primary balance: 7.5 percent of GDP in FY18/19 (table).
- Tax revenue: 26.4 percent of GDP in FY18/19 (table).
- Debt: 94.4 percent of GDP in FY18/19 (table) (note: debt follows the EFF definition prior to FY16/17 and FRL definition afterwards).
- Wages and salaries: 8.9 percent of GDP in FY18/19 (table).
- Interest expense: 6.3 percent of GDP in FY18/19 (table).
- The government is committed to sustain policy discipline after the conclusion of the SBA; it requested the Economic Programme Oversight Committee to continue monitoring macroeconomic targets and reform commitments until the fiscal council becomes fully operational.

### Financial sector oversight and market development
- Important gains in oversight of financial institutions have been made.
- Recommended next steps:
  - Enhanced group-wide supervision of financial conglomerates.
  - Improving data and analytics.
  - Better coordination among financial regulators.
  - An improved legislative framework for the resolution of financial intermediaries.
  - Further strengthening of the AML/CFT framework.
- FX market infrastructure:
  - Absence of a trading platform contributed to higher realized volatility in the J$/US$ exchange rate.
  - BOJ’s reduced FX sales have also affected market dynamics since the introduction of FX auctions in June 2017.
  - In June, dealers were asked to post exchange rates on a Bloomberg platform (limited take up).
  - A permanent technological solution to increase transparency is expected to be completed in early-2020.

### Policy discussions and reform priorities
- Main policy focus areas discussed:
  - Building institutions and advancing fiscal reforms to safeguard and sustain economic stability and debt reduction.
  - Improving monetary operations and policy transmission.
  - Developing the FX market by enhancing pricing transparency and reducing the central bank’s footprint.
  - Bolstering financial inclusion, access to credit, and formality.
  - Developing debt and capital markets.
  - Moving to risk-based and consolidated supervision of financial conglomerates.
  - Strengthening financial institutions’ resolution regime.
- Supply-side reforms needed to promote inclusive growth and lower poverty:
  - Productivity-enhancing public investments in human and physical capital.
  - Strengthened governance.
  - Greater financial inclusion.
  - Prioritizing measures to combat crime.
  - Implementing policies to build resilience to natural disasters and weather fluctuations.
  - To create fiscal space for these efforts, the government will have to strengthen fiscal institutions and modernize the compensation framework for public employees.

### Risks and downside scenarios
- Overall risks are tilted to the downside.
- External risks:
  - Sustained higher oil prices.
  - Tighter and/or volatile global financial conditions.
  - Weaker global growth that could negatively impact tourism and increase capital outflows.
- Domestic risks:
  - Longer-than-expected shutdown at Alpart if investment upgrades are delayed.
  - Weather swings that put agriculture at risk.
  - Uncertainty linked to the future of the Petrojam refinery.
  - Capacity constraints and slow-moving resolution of structural challenges—including crime, governance, access to finance, and public sector inefficiencies—could erode public confidence and reduce medium-term growth.
- Liability management:
  - GOJ conducted a liability management operation buying about US$1 billion of international bonds maturing in 2022, 2025 and 2028 and reopening US$815 million in 2045 bonds at a yield-to-maturity of 5.8 percent.
  - The buyback involved US$966 million of sovereign bonds maturing between 2022 and 2028 and an issuance of US$815 million bonds maturing 2045 (note from amortization profile).

*International Monetary Fund — Jamaica: Sixth Review under the Stand-By Arrangement (Executive Summary and RECENT DEVELOPMENTS, OUTLOOK, AND RISKS), October 16, 2019.*

### 10.      Banks face easier financial conditions. Lending rates have declined, albeit by less than the

### 1jamea2019002 - 10.      Banks face easier financial conditions. Lending rates have declined, albeit by less than the

### Banking and credit conditions
- Lending rates have declined, albeit by less than the reduction in the policy rate.
- Most new lending is to households (for mortgages and personal consumption which have grown by around 30 percent from 2017Q2 to 2019Q2).
- NPLs are at a historic low: 2.4 percent of total loans.
- Loan loss provisions are high, and banks are well-capitalized.
- Anecdotal concern: smaller banks may be underwriting mortgages with high loan-to-value ratios, which could create debt-service difficulties for some households if income growth weakens.

### Household indebtedness and vulnerabilities
- Mortgage and personal consumption lending expansion: around 30 percent growth from 2017Q2 to 2019Q2.
- Household interest spending shock: household interest spending could jump by 25 percent if lending rates were to return to their 10-year average (shock scenario).
- Household debt composition: Mortgage Debt forms the largest portion of household debt; other categories include Installment Loans and Other Secured and Unsecured Debt.
- Household income growth is weakening, leaving some borrowers vulnerable to debt servicing risks.
- Comparative level: household indebtedness has increased but is broadly in line with EM peers (referenced EM percentiles for HH Debt to GDP).

### Monetary policy, liquidity, and transmission
- The BOJ cut the policy rate by 25bps in August to support credit creation, entrench inflation within the target range, and fend off looming global risks.
- Given rising and high levels of excess reserves held by banks, and existing monetary and fiscal stimulus, a pause in further policy rate cuts is appropriate.
- Staff’s current forecasts suggest that, at current policy rates, the balance of risks is for inflation to be below the mid-point of the target range over the next 2 years.
- The BOJ should maintain rates at current levels, communicate an easing bias while inflation remains below the mid-point, and be prepared to use both policy rates and reserve requirements if the inflation outlook weakens further.
- Monetary transmission requires strengthening through regulatory and market reforms, including:
  - Introducing a monthly averaging of reserve requirements.
  - Replacing the liquid asset ratio requirement with a more internationally comparable liquidity coverage ratio (LCR).
  - Developing domestic debt markets to meet demand for liquid assets, improve the efficiency of the primary dealer system, and facilitate creation of investible securities to support secondary market activity and liquidity management.
- Excess liquidity indicator: Commercial Bank Excess Liquidity to Total Liquidity (three months rolling average) has risen (chart referenced).

### Fiscal and program performance
- Program performance: all end-June quantitative performance criteria and indicative targets were met.
- Primary surplus: exceeded the program target by about J$19 billion (0.9 percent of GDP), buoyed by GCT and international trade taxes.
- Capital expenditures: underperforming to date due to delays in a major road project but expected to match budget targets by the end of the fiscal year.
- Non-borrowed reserves: US$385 million above the end-June target, reflecting robust tourism and reduced FX sales to public entities.
- Key program numerical outcomes (end-June): Primary balance (actual) 37.9 (PC 19.0, Adjusted PCs 19.0) — Status: Met; Overall balance of the public sector (actual) 18.0 (PC -14.0, Adjusted PCs -14.0) — Met. (Full table of PCs and Indicative targets presented in source.)
- FY2019/20 budget: on track; supplementary budget maintains the primary surplus target of 6.5 percent, with modest increase in social spending and reallocation among capital projects.
- Public debt: remains high at 94 percent of GDP; fiscal objective is to achieve the debt target of 60 percent of GDP by FY25/26 (enshrined in the Fiscal Responsibility Law (FRL)).
- Fiscal policy recommendations to safeguard gains:
  - Avoid expanding discretionary and legislative tax incentives.
  - Prioritize spending to improve the social safety net and invest in health and education infrastructure.
  - Increase anti-crime spending and investments in transportation infrastructure.
  - Prevent the accumulation of domestic arrears.
  - Divest public enterprises where feasible.

### Public bodies, governance, and public financial management (PFM)
- Institutional reforms: delays in tabling legislation to establish a fiscal council and a special resolution regime for financial institutions due to stakeholder and capacity constraints.
- Interim oversight: GOJ signed a Memorandum of Understanding with the Economic Programme Oversight Committee (EPOC) to monitor progress against quantitative targets and reform measures.
- Operations and governance of public bodies: pending regulations to improve nomination, selection and appointment to boards of public bodies to enhance transparency, accountability, and governance.
- Petrojam options (medium-term, as assessed by staff):
  - (i) Keep the refinery open but replace the Customs Administration Fee (CAF) margin and ad-hoc price adjustments with a transparent direct budget transfer to Petrojam.
  - (ii) Divest the refinery, deciding whether to retain or phase out the CAF margin and ad-hoc price adjustments.
  - (iii) Close the refinery (may have one-off growth and modest job effects).
  - Minimum requirement for any action: enhance transparency by establishing automatic pricing reflecting import prices, record any implicit fiscal transfer transparently on-budget, and include a sunset date.
  - GOJ is examining changes to the fuel pricing mechanism to ensure transparent medium-term pass-through of global fuel prices while smoothing volatility and delinking fuel pricing from Petrojam’s profitability; GOJ should monitor automatic pricing implementation and distributional issues.
- PFM improvements to continue:
  - Revenue authorities should complete risk-based audits and prevent tax leaks from Special Economic Zones.
  - Closure of commercial bank accounts: 644 out of over 3000 accounts closed since June 2019; efforts should continue to prevent potential misuse of government resources while improving transparency and accountability.
- Public sector transformation: 16 additional public bodies have been merged or closed, but overall pace has been slow; reform requires performance-based compensation, streamlining allowances, prioritization of key services, and eventual reduction in public workforce size.

*Source: IMF Staff calculations.*

### 20.      Central bank FX intervention should be limited to flash auctions when there are clear

### 20.      Central bank FX intervention should be limited to flash auctions when there are clear

### FX intervention and exchange rate policy
- Central bank FX market purchases should be governed by the central bank’s reserve accumulation objectives, undertaken transparently, in small amounts, and through regular auctions that minimize the impact on the currency.
- FX intervention should be limited to flash auctions when there are clear disruptions in market functioning.
- Exchange rate flexibility should be maintained; FX sales by the central bank should be confined to providing liquidity in times of disorderly market conditions.

### Bank of Jamaica (BOJ) role and market development
- The BOJ should continue to scale back its footprint in the FX market.
- Having adopted the global FX code of conduct, the BOJ should oversee its appropriate implementation to promote market integrity and improve wholesale FX market effectiveness.
- The BOJ sporadically reduced its direct FX sales to Petrojam during May and June.
- Policy steps recommended for the BOJ:
  - Aim to have all public entities purchase their FX needs in the market while progressively lowering FX surrender requirements.
  - Facilitate sequencing and development of an FX forwards market by championing an education campaign and working with large and frequent FX buyers such as Petrojam to establish requisite legal and regulatory frameworks.
  - Introduce prudential regulations that limit FX net open positions and improve monitoring and enforcement of these limits.

### Enhancing resilience of the financial sector
- Ongoing expansion in lending to households increases the need for better data to assess credit risks:
  - Recent private credit growth has been driven largely by consumer loans.
  - Lack of detailed household lending data prevents effective monitoring of associated risks.
  - Expanding data collection would improve assessment and management of household lending risks and facilitate rollout of macroprudential policies.
  - Supervision of regulated credit institutions and expanding the regulatory perimeter to include the currently unregulated micro-credit sector is necessary.
- Further strengthening financial sector oversight and safety nets (in line with FSAP recommendations). Immediate priorities include:
  - Build capacity to undertake risk-based, consolidated supervision of financial conglomerates; this will require better coordination between the BOJ and FSC (including for data collection and sharing).
  - Finalize comprehensive legislation for a Special Resolution Regime that has (i) an administrative resolution regime, (ii) a specialized insolvency framework, and (iii) funding modalities in the event of the resolution of financial intermediaries.
  - Strengthen the AML/CFT regime by implementing CFATF 2017 Mutual Evaluation Report recommendations, including:
    - (i) completing a second National AML/CFT Risk Assessment;
    - (ii) improving coordination across relevant agencies involved with AML/CFT oversight and enforcement;
    - (iii) passing key legislative amendments to the Proceeds of Crime Act and Terrorism Prevention Act (submission to Parliament is expected before end-year).

### Data issues
- Jamaica is close to meeting Special Data Dissemination Standards (SDDS) subscription requirements; outstanding publications include a production index, data on wages and earnings, and general government operations, which may be feasible in 2020.
- Need to continue strengthening data quality and timeliness:
  - Recent large revisions to current account data highlight need for better collection and coordination among data providers.
  - BOJ should continue upgrading capacity and statistical methods to align with the 2016 Monetary and Financial Statistics Manual and Compilation Guide, and coordinate with the FSC to produce consistent data on nonbank entities.
  - Improving STATIN’s capacity, including routine publication of quarterly expenditure GDP figures, will better inform policymaking.
  - The Ministry of Finance should consider fully upgrading its Government Financial Statistics from the 1986 and 2001 standards.

### Program modalities and debt service projections
- The program is fully financed and Jamaica’s capacity to repay the Fund is adequate.
- Under a downside scenario with a fully drawn SBA, debt service would peak in 2023 at 19 percent of exports of goods and services (7 percent of GDP).
- If undrawn, debt service would peak at 3.5 percent of exports (1 percent of GDP).

### Staff appraisal and institutional reform priorities
- Achievements under two consecutive IMF-supported programs:
  - Public debt has fallen dramatically.
  - The unemployment rate is at an all-time low.
  - The current account deficit and inflation are subdued.
  - FX reserves are comfortable.
  - Improved oversight of the financial system and reshaping of the securities dealers’ industry have lessened vulnerabilities.
- Challenges and ongoing priorities:
  - Growth has been resilient but at lower-than-expected rates; poverty remains high.
  - Jamaica is on-track to meet the 60 percent of GDP debt target by FY25/26 specified in the Fiscal Responsibility Law.
  - Monetary policy is geared toward bringing inflation to the mid-point of the BOJ’s target band and a flexible exchange rate is becoming steadily entrenched.
- Institutional building and governance recommendations:
  - Complete work on building domestic institutions: put in place an effective fiscal council, an independent central bank, and a well-functioning governance framework for public bodies.
  - Advance public sector transformation to prioritize government functions and redesign public sector compensation.
  - Support productivity-enhancing investment in human and physical capital, including:
    - continuing to tackle crime;
    - strengthening governance and reducing corruption vulnerabilities;
    - accelerating reforms to land-titling, factoring and leasing;
    - expanding digital banking to foster greater financial inclusion;
    - investing in disaster resilience, particularly in the agricultural sector;
    - expanding coverage of the social safety net.

### Financial sector supervision and AML/CFT
- The increasing complexity and interconnectedness of the financial sector requires:
  - Enhanced group-wide supervision and resources.
  - Better data gathering and analytics.
  - Greater coordination among financial regulators.
  - An improved legislative framework for the resolution of financial intermediaries.
  - Further investments in AML/CFT capabilities.

### Multiple currency practice (MCP) and program reviews
- Staff supports the authorities’ request to approve retention of the multiple currency practice (MCP).
- The IMF’s Executive Board approved temporary retention until November 4, 2019 for non-BOP reasons; staff recommends MCP retention for an additional 12-month period from the date of the decision to complete the review.
- Staff supports completion of the sixth review under the SBA.
- The next Article IV under the 24-month cycle is planned for March 2020, after which staff recommends returning to a standard 12-month Article IV cycle.

### Box 1 — Promoting Inclusive Growth: key constraints and illustrative gains
- Structural rigidities constraining growth include crime, low financial inclusion, poor infrastructure, weak governance, and vulnerability to weather-related events.
- Violent crime:
  - Jamaica’s homicide rate is one of the highest in the world.
  - Staff calculations point to a significant growth payoff (of around 0.5 percent) from lowering crime to the world average.
- Education and child attendance:
  - Ancillary schooling costs can add up to 40 percent of the per capita consumption of a poor household.
  - Only three-quarters of children in the bottom income quintile attended at least 19 days of school per month (compared to 94 percent in the top quintile).
  - Scope to expand PATH coverage and allocate resources for educational costs of PATH-eligible households.
- SME finance:
  - The 2017 IFC Enterprise Finance Gap database suggests unmet demand for credit by both formal and informal SMEs is around 20 percent of GDP.
  - Financing constraints for Jamaican SMEs are around 18ppts higher than the Caribbean average.
  - Closing the SME financing gap identified by the IFC could raise medium-term growth by 0.5 percent.
- Agriculture:
  - Nearly two-thirds of Jamaica’s smaller land parcels remain untitled, limiting farmers’ ability to pledge land as collateral.
  - Investments in rural road networks, irrigation, water delivery, storage, and modern farming practices would improve resilience and productivity.

### Box 2 — Fuel Pricing Mechanism: findings and scenarios
- Retail fuel prices in Jamaica are higher than most countries in the Central American and Caribbean regions by about 16-30 percent on average.
- Petrojam is the price maker; the refinery billing price (RBP) is based on import crude prices at Cost, Insurance and Freight (CIF) plus taxes, terminal and rack fees, and an ad-hoc adjustment factor.
- During FY2014-18, the average price differential between pre-tax sales price and CIF cost for gasoline was about US$16 per barrel.
- Refining-related price differentials and margins:
  - A Custom Administration Fee (CAF) equivalent margin of about J$3.1 per liter contributed to price differentials.
  - An ad-hoc smoothing scheme exceeded zero over time and contributed up to half of Petrojam’s gross margin during FY2014-18.
  - Absent the ad-hoc adjustments, Petrojam’s average net loss could be about US$10 million rather than a profit of US$36 million per year during FY2014-18.
- Two illustrative pricing scenarios for auto diesel:
  - Scenario 1 keeps the CAF equivalent margin; Scenario 2 phases it out.
  - Both apply a 3-month moving average (MA) on global crude oil prices and reduce the ad-hoc adjustment component by half.
- Selected indicators (based on average over the period 2014-18):
  - Retail diesel fuel prices: Complete pass-through 133; Historical actual level 133; Scenario 1 129; Scenario 2 120.
  - Standard deviation: Complete pass-through 24; Historical actual level 17; Scenario 1 16; Scenario 2 15.
  - Coefficient of variation: Complete pass-through 0.3; Historical actual level 0.1; Scenario 1 0.1; Scenario 2 0.1.
  - Absolute average monthly change: Complete pass-through 6.6; Historical actual level 2.7; Scenario 1 2.6; Scenario 2 2.8.
  - Largest rise in single month: Complete pass-through 21.9; Historical actual level 15.0; Scenario 1 14.0; Scenario 2 14.1.
  - Largest cumulative rise in 3 months: Complete pass-through 32.0; Historical actual level 17.9; Scenario 1 17.5; Scenario 2 17.4.
  - Standard deviation of ad-valorem taxes: Historical actual level n.a.; Scenario 1 1.5; Scenario 2 1.5; Complete pass-through 1.4.
  - Petrojam profitability relative to actual historical levels (in percent): Historical actual level n.a.; Complete pass-through 100; Scenario 1 63; Scenario 2 21.
- Policy considerations:
  - Implement a transparent, automatic pricing mechanism that ensures full pass-through of global fuel prices over the medium-term while smoothing volatility and protecting fiscal revenues.
  - Specify a pricing formula linking retail prices and import costs and a timeline for updating pricing components (e.g., import cost on a monthly basis and a review every 3-5 years).

*Source: IMF staff report (excerpts provided in the source content).*

### Box 2. Fuel Pricing Mechanism (Concluded)

### Box 2. Fuel Pricing Mechanism (Concluded)

### Decomposition of profit margin at Petrojam
- Figure title: Decomposition of Profit Margin at Petrojam (US$ million per year average over FY2014-18)
- Reported numeric series (as presented in the figure): 98, 45, 26, -19, 46, 62, 36
- Sources: Petrojam and Government of Jamaica.
- Note: Breakdown between refinery and terminal based on Petrojam Review Committee report.

### Fuel prices under alternative pricing mechanisms (auto diesel, J$ per liter)
- Series shown: Auto diesel pump price; Transparent smoothing scenario 1/; Transparent smoothing and phasing-out of CAF 1/; WTI crude price CIF.
- Note 1/ (text preserved verbatim): Transparent smoothing assumes the WTI crude price at CIF and a one-half reduction of ad-hoc adjustment in the Petrojam margin. The second scenario further assumes an exit from refining activity and the custom administration fee (CAF) is phased out completely.
- Sources: Government of Jamaica, Petrojam financial statements, and IMF staff estimates.

### Price differential between sales price and CIF cost (in percent of Sales Price)
- Figure components (legend preserved): MOGAS E-10 90; MOGAS E-10 87; Ultra low sulfur diesel ULSD; LPG; Heavy fuel oil 2.2S; Auto diesel; Turbo fuel.
- Margins/components shown (legend preserved): Terminal and rack fees; Custom administrative fee (CAF) margin; Ad-hoc adjustment; Cost recovery and grade margin.
- Axis range indicated in the figure: -5 to 25 (in percent of Sales Price).
- Sources: Jamaican authorities and IMF staff estimates.

### Regional fuel prices at the pumps (US$ per gallon)
- Countries listed in the figure (order preserved): Barbados; Belize; Jamaica; Dominican Republic; Cuba; Grenada; Bahamas; Cayman Islands; Saint Lucia; Aruba; Guyana; Mexico; Nicaragua; Honduras; Suriname; Guatemala; Dominica; El Salvador; Trinidad and Tobago; Puerto Rico; Panama; Haiti; Average.
- Price series shown: Gasoline; Diesel.
- Axis range indicated in the figure: 0 to 8 (US$ per gallon).
- Sources: Government of Jamaica, Petrojam Review Committee, and IMF staff estimates.

*Source: Box 2. Fuel Pricing Mechanism (Concluded), IMF staff summary of figures and notes.*

### 2. Overall balance of the public sector (floor) 3/

### 2. Overall balance of the public sector (floor) 3/

### Performance targets: fiscal flows and ceilings (cumulative flows from April 1 through March 31) 3/4/5/9/10/
- Overall balance of the public sector (floor):
  - -41.1
  - -36.6
  - 29.
  - 7
  - -14.7
  - 36.8
  - -14.0
  - -14.0
  - 18.0
  - -25.0
- Net increase in the central government guaranteed debt (ceiling) 3/:
  - -8.4
  - -8.4
  - -11.1
  - -8.4
  - -11.9
  - 0.0
  - 0.0
  - -1.4
  - 0.0
- Central government accumulation of domestic arrears (ceiling) 4/ 10/:
  - 0.0
  - 0.0
  - -5.2
  - 0.0
  - -5.8
  - 0.0
  - 0.0
  - -7.4
  - 0.0
- Central government accumulation of tax refund arrears (ceiling) 5/ 10/:
  - 0.0
  - 0.0
  - -12.4
  - 0.0
  - -12.7
  - 0.0
  - 0.0
  - -14.4
  - 0.0
- Accumulation of external debt payment arrears (ceiling) 4/ 9/:
  - 0.0
  - 0.0
  - 0.0
  - 0.0
  - 0.0
  - 0.0
  - 0.0
  - 0.0
  - 0.0

### Indicative targets and social spending 7/11/
- Tax revenues of the central government (floor) 3/:
  - 360.0
  - 360.0
  - 388.7
  - 516.0
  - 542.9
  - 115.0
  - 115.0
  - 137.4
  - 242.0
- Change in the stock of public bodies non-guaranteed debt (ceiling) 11/:
  - 18.0
  - 18.0
  - 15.2
  - 20.0
  - 17.8
  - 22.0
  - 22.0
  - 11.0
  - 24.0
- Central government spending on social programs (floor) 3/ 7/:
  - 19.4
  - 19.4
  - 28.3
  - 28.2
  - 34.6
  - 6.7
  - 6.7
  - 11.0
  - 12.3
- Total loan value of all user funded PPPs (ceiling, percent of GDP):
  - 3.0 3.0 1.6 3.0 1.6 3.0 3.0 1.5 3.0

### Monetary targets
- Stock of non-borrowed net international reserves (floor) 6/8/ (in millions of U.S. dollars):
  - 2,200
  - 2,200
  - 2,521
  - 2,200
  - 2,634
  - 2,250
  - 2,202
  - 2,587
  - 2,300
- Monetary policy consultation clause (in percent) 12/:
  - Outer band (upper): 6.5, 6.0, 6.0, 6.0
  - Center inflation target: 5.0, 2.4, 5.0, 3.4, 5.0, 4.2, 5.0
  - Inner band (lower): 3.5, 4.0, 4.0, 4.0
  - Outer band (lower): 2.0, 2.5, 2.5, 2.5

### Technical notes (as reported)
- 1/ Targets as defined in the Technical Memorandum of Understanding (TMU).
- 2/ Based on program exchange rates defined in the TMU.
- 3/ Cumulative flows from April 1 through March 31.
- 4/ Includes debt payments, supplies and other committed spending as per contractual obligations; full definition in TMU.
- 5/ Includes tax refund arrears as stipulated by law.
- 6/ In millions of U.S. dollars.
- 7/ Defined as a minimum annual expenditure on specified social protection initiatives and programmes (defined in TMU).
- 8/ Stock of BOJ NIR minus all foreign currency CDs to domestic residents; full definition in TMU.
- 9/ Continuous performance criterion.
- 10/ The accumulation is measured against the stock at end-March 2016, which is J$21.0 billion for domestic arrears and J$17.3 billion for tax arrears.
- 11/ For end-Dec 2016 and end-Mar 2017, these are cumulative flows from October 1, 2016. For subsequent dates, these are cumulative flows from April 1, 2017.
- 12/ The Monetary policy consultation clause bands consist of two types of thresholds.  The Inner band triggers a Staff consultation and an Outer band triggers a Board conusltation as detailed in the TMU.

### Related IMF tables and projections excerpt (selected figures preserved exactly)
- Table 12. Jamaica: Indicators of Fund Credit, 2019–27 (In millions of SDRs, unless otherwise specified):
  - Prospective drawings (3-year SBA)1,195.30
  - (in percent of quota)312.17
  - Amortization: 34.76 83.68 93.12 93.12 679.38 653.67 28.32 9.44 0.00
  - Interest and service charges 1/ : 8.31 31.45 29.93 28.13 21.99 8.89 0.63 0.13 0.00
  - GRA surcharges 1/ : 0.00 17.93 16.34 14.49 11.69 0.02 0.00 0.00 0.00
  - SDR charges and assessments 1/ : 0.28 1.13 1.13 1.13 1.13 1.13 1.13 1.13 1.13
  - Total debt service 1/: 43.35 134.19 140.53 136.88 714.19 663.72 30.09 10.71 1.14
  - (in percent of exports of G&S) 2/: 1.43 4.15 4.17 3.85 19.43 17.49 0.77 0.25 0.02
  - (in percent of GDP) 2/: 0.49 1.45 1.44 1.34 6.66 5.89 0.25 0.08 0.01
  - Outstanding stock 1/: 1,640.73 1,557.04 1,463.92 1,370.80 691.43 37.76 9.44 0.00 0.00
  - (in percent of quota): 428.50 406.64 382.32 358.00 180.58 9.86 2.47 0.00 0.00
  - (in percent of GDP) 2/: 18.68 16.84 15.05 13.42 6.45 0.34 0.08 0.00 0.00
  - Memorandum items:
    - Exports of goods and services (US$ millions) 2/: 4,514.96 4,826.61 5,030.65
    - GDP (US$ millions) 2/: 13,096.84 13,785.90 14,501.16 15,228.51 15,983.78 16,792.68 17,642.39 19,141.99 20,769.06
    - Debt service as percent of baseline exports1.15 3.55 3.56
    - Debt service as percent of baseline GDP0.40 1.18 1.19 1.11 5.55 4.95 0.22 0.07 0.01
    - Quota382.90 repeated across years

### Annex highlights: Achievements under successive IMF-supported programs (selected points, preserved phrasing)
- A sustained fiscal adjustment—with a budget primary surplus at or in excess of 7 percent of GDP for six years in a row—combined with opportunistic debt liability management operations have reduced public debt by almost 50 percentage points to 94 percent of GDP at end-March 2019.
- Social spending has consistently overperformed the program floor during the fiscal consolidation, with increased budget allocation to the Programme of Advancement Through Health and Education (PATH) and the school feeding program, including to support the shift from direct to indirect taxation.
- The wage bill declined from 10.1 percent of GDP in FY2013/14 to 8.9 percent of GDP in FY2018/19.
- Revenue neutral personal income tax reforms were completed in two phases (FY2016/17 and FY2017/18). Distortionary financial turnover taxes were subsequently reduced or eliminated in FY2019/20.
- The Fiscal Responsibility Law was strengthened in 2014 to entrench the public debt anchor at 60 percent of GDP by FY2025/26.
- Thirty public bodies have been closed, merged, divested, or reintegrated into central government; earmarked revenues from public entities are being directed to the Consolidated Fund on an ongoing basis.
- BOJ accumulation of reserves supported non-borrowed reserves to more than $2½ billion at end-June 2019. Gross reserves are 110 percent of the ARA metric.
- The energy generation matrix is being diversified with the new US$1 billion LNG terminal. The country is on track to achieve the 20 percent target for renewable energy sources by 2030.
- Privatizations and concessions included the Kingston Container Terminal, Norman Manley International airport, and the IPO of the GOJ-owned Wigton Wind Farm.

*Source: Excerpts from the IMF staff report content provided in the chapter "2. Overall balance of the public sector (floor) 3/".*

### Appendix I. Letter of Intent

### Appendix I. Letter of Intent

### Overview and recent outcomes
- Government of Jamaica (GOJ) under the Fund-supported precautionary Stand-By Arrangement (SBA) since November 2016.
- Public debt reduced by 50 percent of GDP—to 94 percent of GDP at end-March 2019.
- Primary surplus target relaxed by 0.5 percent to 6.5 percent of GDP in the current budget.
- Net international reserves position described as comfortable.
- Unemployment at an all-time low of 7.8 percent and more than halving since April 2013.
- Inflation restored to the Bank of Jamaica’s inflation target range of 4–6 percent.
- Programme performance: all quantitative performance criteria for June 2019 were met; primary surplus exceeded programme target; non-borrowed reserves were US$385 million above the target.

### Policy commitments and institutional reforms
- Design an independent Fiscal Council to act as guardian of fiscal rules enshrined in the Fiscal Responsibility Law (public debt of 60 percent of GDP or less by end-March 2026).
- Amend the BOJ Act to make price stability the cornerstone of monetary policy, supported by a flexible exchange rate and limiting FX interventions to episodes of severe market dislocations.
- Adopt a natural disaster financing strategy to hedge against costly natural hazards and strengthen macro-fiscal policymaking.
- Preserve financial sector stability by legislating a special resolution regime for financial institutions and implementing consolidated risk-based supervision.
- Continue transformation of the public sector to improve delivery of government services and channel resources towards growth-enhancement.
- Maintain an Economic Programme Oversight Committee (EPOC) Memorandum of Understanding to continue domestic monitoring until the Fiscal Council is operational.
- Request retention of the multiple currency practice related to the multiple-price FX auction as approved on November 5, 2018.
- Authorize IMF publication of the letter, its attachments, and the staff report for the sixth review under the SBA.

### Quantitative performance targets (FY2019/20–2020/21) — fiscal and monetary targets (values in billions of Jamaican dollars unless otherwise stated)
Fiscal Targets (cumulative flows from April 1 through March 31)
- Primary Balance of the Central Government (floor) 1/
  - End Dec 2019: 49.6
  - End Mar 2020: 140.0
  - End Jun 2020: 18.0
  - End Sep 2020: 58.0
  - End Dec 2020: 78.0
  - End Mar 2021: 146.6
- Overall Balance of the Public Sector (floor) 1/
  - End Dec 2019: -0.8
  - End Mar 2020: -6.2
  - End Jun 2020: 8.9
  - End Sep 2020: 3.3
  - End Dec 2020: 3.5
  - End Mar 2021: 5.6
- Net Increase in the Central Government Guaranteed Debt (ceiling) 1/
  - All dates: 0.0
- Central Government Accumulation of Domestic Arrears (ceiling) 2/ 3/
  - All dates: 0.0
- Central Government Accumulation of Tax Refund Arrears 3/ 4/
  - All dates: 0.0
- Tax Revenues of the Central Government (floor) 1/
  - End Dec 2019: 355.0
  - End Mar 2020: 510.0
  - End Jun 2020: 110.0
  - End Sep 2020: 240.0
  - End Dec 2020: 350.0
  - End Mar 2021: 535.0
- Central Government Spending on Social Programmes 1/ 5/
  - End Dec 2019: 18.0
  - End Mar 2020: 30.0
  - End Jun 2020: 7.0
  - End Sep 2020: 12.8
  - End Dec 2020: 19.7
  - End Mar 2021: 32.0
- Total Loan Value of all User Funded PPPs (% of GDP) (ceiling)
  - All dates: 3.0%

Monetary Targets
- Stock of non-borrowed net international reserves (floor) 6/ 7/ (In millions of U.S. dollars)
  - End Dec 2019: 2,390
  - End Mar 2020: 2,520
  - End Jun 2020: 2,560
  - End Sep 2020: 2,590
  - End Dec 2020: 2,620
  - End Mar 2021: 2,660
- Inflation (in percent) — Upper Band
  - All dates: 6.0
- Inflation (in percent) — Lower Band
  - All dates: 4.0

Notes on targets
- 1/ Cumulative flows from April 1 through March 31.
- 2/ Includes debt payments, supplies and other committed spending as per contractual obligations.
- 3/ Measured against the stock at end-March of the preceding fiscal year.
- 4/ Includes tax refund arrears as stipulated by law.
- 5/ Defined as a minimum annual expenditure on specified social protection initiatives and programmes.
- 6/ In millions of U.S. dollars.
- 7/ Stock of BOJ NIR minus all foreign currency CDs to domestic residents.
- a/ Targets are subject to revision with the approval in Parliament of the Budget in March and the Supplementary Budget in September of each year.

### Priority actions (FY2019/20–FY2020/21) — selected timelines and responsible agencies
I. MACRO-FISCAL POLICY AND MANAGEMENT
- Strengthen Macro-Fiscal capacity of the Ministry of Finance and the Public Service. — Continuous — MOFPS, TAJ, PIOJ
- Develop and submit to Parliament a National Natural Disaster Risk Financing Policy for Jamaica by Dec-19. — MOFPS
- Submit to Parliament legislation establishing a Fiscal Council by Apr-20. — MOFPS
- Granting of discretionary tax waivers subject to a de minimis cap of J$10 million in any month. — Continuous — MOFPS
- Table amendments/regulations to/for the Large-scale Projects and Pioneer Industries Act by Sep-20. — MOFPS
1.2 Revenue Administration
- Table core regulations for the new Customs Act in Parliament by Sep-20. — JCA, MOFPS
- Complete procurement and configuration of Phase 1 of the IT infrastructure for Electronic Single Window System Project by Jun-20. — JCA, MOFPS
1.3 Public Financial Management
- Complete legal review of commercial bank accounts with government cash balances by Jun-20. — AGD/MOFPS
1.4 Debt Management
- Complete implementation of phase 2 of the upgrade of the Central Securities Depository (JamClear-CSD) by Dec-19. — MOFPS/BOJ

II. MONETARY POLICY AND FINANCIAL SECTOR DEVELOPMENT
2.1 Monetary Policy
- Present to Parliament the report of the Joint Select Committee on the Bill to amend the BOJ Act by Dec-19. — MOFP/BOJ
- Maintain gross reserves of at least 100 percent of the ARA benchmark continuously. — BOJ
- Draft regulation by March 2020 to facilitate introduction of the Liquidity Coverage Ratio and phase-out of the Liquid Asset Requirement (non-cash) by June 2020. — Mar-20 — MOFPS/BOJ
- Introduce an FX market trading platform; first phase to be operational by Mar-20. — Mar-20 — BOJ
2.2 Financial Sector Stability and Development
- Submit legislation to Parliament for a Special Resolution Regime for financial institutions by Mar-21. — MOFPS/BOJ/FSC/JDIC
- Complete further amendments to the Micro Credit Act for introduction in Parliament by Dec-19. — MOFPS/BOJ/FSC
- Submit legislation to Parliament to amend the Cooperative Societies Act and prudential regulatory regime for credit unions by Jun-20. — MOFPS/MICAF/BOJ
2.3 Financial Inclusion
- Complete design of platform for interoperability of mobile payment services by Oct-20. — BOJ
- Amendments to the Proceeds of Crime Act to allow a risk-based approach to KYC and CDD by Oct-19. — MNS/MOFPS/BOJ
- Improve SME financing: develop platform to facilitate secondary market for moveable collateral; recommendations by Mar-20. — Mar-20 — MICAF, MOFPS

III. PUBLIC SECTOR TRANSFORMATION
3.1 Public Sector Reform
- Start up HR shared services Pilot by May-20. — MOFPS/TIU
- Start Build and Test for Internal Audit shared services by May-20. — MOFPS/TIU
- Begin roll-out of GovNet by Apr-20. — MOFPS/TIU/MSET
- Complete inventory of public sector functions/services with prioritization recommendation by Jun-20. — MOFPS
- Complete roll-out of the human resources software (MyHR+) for an additional seven (7) entities by Mar-20. — MOFPS
3.2 Public Bodies
- Complete merger/closure/reintegration of an additional 18 public bodies by Mar-20 (in addition to 12 already underway). — MOFPS/TIU
- Complete merger/closure/reintegration of additional 12 entities during calendar year 2020 by Dec-20. — MOFPS/TIU
- Cap total stock of domestic arrears of specified public bodies at J$6.4 billion; monitored monthly. — Monthly — MOFPS
- Complete the divestment of Jamaica Mortgage Bank by Oct-20. — DBJ/TIU
3.3 Governance
- Table regulations in Parliament addressing nomination, selection and appointment to boards of public bodies by Dec-19. — MOFPS
- Submit to Cabinet a revised fuel pricing mechanism by Mar-20. — MSET/Petrojam
- Develop and submit to Cabinet the National Anti-Corruption Strategy by Sep-20. — Integrity Commission

### Definitions of quantitative targets — key points
- Central government for monitoring consists of institutions covered under the state budget, including public bodies financed through the Consolidated Fund.
- Fiscal year: April 1 through March 31.
- Primary balance definition: total revenues minus primary expenditure; revenues recorded when transferred to a government revenue account; includes grants; capital revenues exclude revenues from asset sales from divestment operations. Primary expenditure recorded on a cash basis and includes compensation, other recurrent expenditures and capital spending; government-funded PPPs treated as traditional public procurements. All primary expenditures directly settled with bonds or other non-cash liabilities recorded as spending above-the-line and financed with debt issuance.
- Overall balance of the public sector: refers to the “Specified Public Sector” under the Fiscal Responsibility Law, consisting of the central government and self-financed public bodies not deemed “commercial” by the Office of the Auditor General (OAG); excludes the Bank of Jamaica (BOJ).
- List of self-financed public bodies used for programme monitoring is specified in the letter (includes entities such as AEROTEL; Airports Authority of Jamaica; Clarendon Alumina Production Limited; Development Bank of Jamaica Limited; Jamaica Mortgage Bank; National Housing Trust; National Water Commission; Petrojam Limited; Port Authority of Jamaica; Student Loan Bureau; Urban Development Corporation; and others).
- Overall balance of public bodies calculated from Statement A’s provided by the Public Enterprises Division of MOFPS; definition used: operational balance, plus capital account net of revenues, minus dividends and corporate taxes transferred to government, plus net other transfers from government. Specific treatment for National Housing Trust and Housing Agency of Jamaica: capital account revenues included among recurrent revenue.
- Group of self-financed public bodies will be adjusted as public bodies’ rationalization, divestments and mergers advance; all newly created entities will be incorporated into the group.

*Appendix I. Letter of Intent — Kingston, Jamaica, October 14, 2019.*

### 4. Ceiling on Net Increase in Central Government Guaranteed Debt: Net increase in central

### 4. Ceiling on Net Increase in Central Government Guaranteed Debt: Net increase in central government guaranteed debt is calculated as issuance minus repayments of central government guaranteed debt, in billions of Jamaican dollars, including domestic and external bonds, loans and all other types of debt.

### Definitions and measurement of debt and arrears
- Net increase in central government guaranteed debt: issuance minus repayments of central government guaranteed debt, in billions of Jamaican dollars, including domestic and external bonds, loans and all other types of debt.
- Foreign currency debt conversion: Foreign currency debt will be converted to Jamaican dollars at the prevailing exchange rate.
- Adjustment if guarantees are called: In the case where the central government debt guarantees are called, the stock of central government guaranteed debt will be adjusted downwards in order to preserve the performance criteria.
- Central government domestic arrears: payments to residents determined by contractual obligations that remain unpaid 90 days after the due date; due date refers to the date in which domestic debt payments are due according to the relevant contractual agreement, taking into account any contractual grace periods.
- Central government domestic arrears include: arrears on domestic central government direct debt, including to suppliers and all recurrent and capital expenditure commitments.
- Measurement of accumulation of domestic arrears: change in the stock of domestic arrears relative to the stock at end-March of the preceding fiscal year.
- Tax refund arrears: obligations on tax refunds in accordance with tax legislation that remain unpaid 90 days after the due date.
- Measurement of accumulation of tax refund arrears: change in the stock of tax refund arrears relative to the stock at end-March of the preceding fiscal year.

### Fiscal floors and ceilings specified
- Cumulative Floor on Central Government Tax Revenues:
  - Tax revenues: revenues from tax collection.
  - Exclusions: all revenues from asset sales, grants, bauxite levy and non-tax revenues.
  - Measurement period: cumulative flow from the beginning to the end of the fiscal year (April 1 to March 31).
- Floor on Central Government Spending on Social Programmes:
  - Social spending: sum of central government spending on social protection programmes as articulated in the central government budget for a particular fiscal year.
  - Social programmes comprise: conditional cash transfers to children 0–18 years and the elderly; youth employment programmes; the poor relief programme for both indoor and outdoor poor; the school feeding programme; and the basic school subsidy.
  - Capital expenditure programmes that must be included:
    - Youth employment programmes comprising on the job training, summer employment and employment internship programme;
    - Conditional cash transfers comprising children health grant, children education grants, tertiary level, pregnant and lactation grants, disabled adult grants, adults under 65 grants and adults over 65 grants;
    - Poor relief programme.
  - Recurrent expenditure programmes that must be included:
    - School feeding programmes including operating costs;
    - Poor relief (both indoor and outdoor) including operating costs;
    - Golden Age Homes;
    - Children’s home, places of safety and foster care including operating cost;
    - Career Advancement Programme;
    - National Youth Service Programme.

### Ceiling on User-Funded PPPs
- Definition: User-funded PPPs are concessions in which users are expected to be the main source of revenue.
- Exclusion condition: The loan value of a PPP may be excluded if the Office of the Auditor General has established that the PPP involves only minimal contingent liabilities (by demonstrating that the project has no debt guarantee, demand or price guarantees or termination clauses that could imply a transfer of liabilities to the government).
- Applicable GDP for the condition: projected nominal GDP for the ongoing fiscal year published in the Fiscal Policy Paper tabled in parliament ahead of the adoption of the relevant fiscal years’ budget.

### Public bodies’ arrears ceiling and monitoring
- Total combined stock cap: The total combined stock of domestic arrears of the following public bodies will be capped at J$6.4 billion:
  - Clarendon Alumina Production (CAP);
  - National Water Commission (NWC);
  - Jamaica Urban Transit Company (JUTC);
  - Housing Agency of Jamaica (HAJ);
  - Urban Development Corporation (UDC);
  - National Road Operating and Constructing Company (NROCC);
  - National Health Fund (NHF).
- Monitoring frequency: The domestic arrears will be monitored on a monthly basis.
- Definition of public bodies’ domestic arrears: payments to residents determined by contractual obligations that remain unpaid 90 days after the due date, taking into account contractual grace periods.
- Inclusion: Public bodies’ domestic arrears include arrears on suppliers’ credits.
- Exclusion for this measure: Arrears on taxes due to the central government, including on PAYE and education tax, are excluded.

### Monetary targets and reserve definitions
- Net international reserves (NIR) of the BOJ (NIR-BOJ): U.S. dollar value of gross foreign assets of the BOJ minus gross foreign liabilities.
- Exclusion from NIR: Funds deposited into escrow to meet any contractual debt obligations that cannot be settled due to international and/or bilateral sanctions will not count towards net international reserves.
- Non-borrowed NIR: NIR-BOJ minus all foreign currency liabilities issued by the BOJ and held by residents.
- Gross foreign assets definition (BPM6-consistent): readily available claims on non-residents denominated in foreign convertible currencies; include BOJ’s holdings of monetary gold, SDR holdings, foreign currency cash, foreign currency securities, liquid balances abroad and the country’s reserve position at the Fund.
- Excluded from reserve assets: any assets that are pledged, collateralized or otherwise encumbered, claims on residents, claims in foreign exchange arising from derivatives in foreign currency vis-à-vis domestic currency (such as futures, forwards, swaps and options), precious metals other than gold, assets in nonconvertible currencies and illiquid assets.
- Gross foreign liabilities of the BOJ: all foreign exchange liabilities to non-residents (thus excluding all foreign exchange liabilities to residents), including commitments to sell foreign exchange arising from derivatives (such as futures, forwards, swaps and options) and all credit outstanding from the Fund but excluding credit transferred by the Fund into a Treasury account to meet the government’s financing needs directly.
- Treatment of Fund credit in NIR: In deriving NIR, credit outstanding from the Fund is subtracted from foreign assets of the BOJ.
- Exclusion from BOJ gross foreign liabilities: GOJ foreign liabilities are excluded from gross foreign liabilities of the BOJ.
- Inflation definition: change over 12 months of the end-of-period headline consumer price index, as measured and published by the Statistical Institute of Jamaica (STATIN).

### Adjusters to non-borrowed NIR targets and baseline disbursements
- Adjuster rule: The non-borrowed NIR targets will be adjusted upward (downward) by the surplus (shortfall) in expected loan disbursements from multilateral institutions (the IBRD, IDB and CDB) and commercial loans guaranteed by multilateral sources, relative to the baseline projection reported in table below.
- Definition of loan disbursements for adjuster: external loan disbursements (excluding project financing disbursements) from official creditors that are usable for the financing of the consolidated government.
- Additional adjuster: non-borrowed NIR targets will be adjusted upward (downward) by the surplus (shortfall) in loan disbursements to the central government that are purchased by or deposited at the BOJ, relative to the baseline projection reported below.

- Table 1. Jamaica: External Disbursements (Baseline Projection) — Cumulative flows from end-September 2019 (in millions of US$)
  - External Loans from multilateral sources:
    - end-December 2019: 105
    - end-March 2020: 105
    - end- June 2020: 105
    - end-September 2020: 130
    - end-December 2020: 130
    - end-March 2021: 305
  - Commercial loans guaranteed by multilateral sources:
    - end-December 2019: 0
    - end-March 2020: 0
    - end- June 2020: 0
    - end-September 2020: 0
    - end-December 2020: 0
    - end-March 2021: 0

### Selected quantitative and performance criteria (excerpt)
- Table 2. Jamaica: Quantitative and Performance Criteria (In billions of Jamaican dollars unless otherwise stated) — selected lines (values preserved as in source):
  - Performance Criteria: Primary balance of the central government (floor)
    - Adjusted Performance Criteria: 68.0
    - Actual: 68.0
    - Indicative Target: 107.7
    - Actual (later columns): 141.6, 153.6, 19.0, 19.0, 37.9, 35.7
  - Performance Criteria: Overall balance of the public sector (floor)
    - Adjusted Performance Criteria: -41.1
    - Adjusted Performance Criteria (alt): -36.6
    - Indicative/Actual entries: 29.7, -14.7, 36.8, -14.0, -14.0, 18.0, -25.0
  - Performance Criteria: Net increase in the central government guaranteed debt (ceiling)
    - Adjusted Performance Criteria: -8.4
    - Actual: -8.4
    - Indicative Target: -11.1
    - Actual (later columns): -8.4, -11.9, 0.0, 0.0, -1.4, 0.0
  - Central government accumulation of domestic arrears (ceiling)
    - Values: 0.0, 0.0, -5.2, 0.0, -5.8, 0.0, 0.0, -7.4, 0.0
  - Central government accumulation of tax refund arrears (ceiling)
    - Values: 0.0, 0.0, -12.4, 0.0, -12.7, 0.0, 0.0, -14.4, 0.0
  - Accumulation of external debt payment arrears (ceiling)
    - Values: 0.0 across entries shown
  - Indicative targets: Tax revenues of the central government (floor)
    - Values: 360.0, 360.0, 388.7, 516.0, 542.9, 115.0, 115.0, 137.4, 242.0
  - Indicative target: Change in the stock of public bodies non-guaranteed debt (ceiling)
    - Values: 18.0, 18.0, 15.2, 20.0, 17.8, 22.0, 22.0, 11.0, 24.0
  - Indicative target: Central government spending on social programs (floor)
    - Values: 19.4, 19.4, 28.3, 28.2, 34.6, 6.7, 6.7, 11.0, 12.3
  - Indicative target: Total loan value of all user funded PPPs (ceiling, percent of GDP)
    - Values: 3.0, 3.0, 1.6, 3.0, 1.6, 3.0, 3.0, 1.5, 3.0

*JAMAICA INTERNATIONAL MONETARY FUND*

### 11. Stock of non-borrowed net international reserves (floor) 6/

### 11. Stock of non-borrowed net international reserves (floor) 6/

### Key statistics and program floors
- Stock values (in millions of U.S. dollars) as presented:
  - 2,200
  - 2,200
  - 2,521
  - 2,200
  - 2,634
  - 2,250
  - 2,202
  - 2,587
  - 2,300
- Note on definition: Stock of BOJ NIR minus all foreign currency CDs to domestic residents; full definition in TMU. (Footnote 8/)

### Monetary policy consultation clause (in percent) 12/
- Outer band (upper): 6.5, 6.0, 6.0, 6.0
- Center inflation target: 5.0, 2.4, 5.0, 3.4, 5.0, 4.2, 5.0
- Inner band (lower): 3.5, 4.0, 4.0, 4.0
- Outer band (lower): 2.0, 2.5, 2.5, 2.5
- Note: The Monetary policy consultation clause bands consist of two types of thresholds. The Inner band triggers a Staff consultation and an Outer band triggers a Board consultation as detailed in the TMU. (Footnote 12/)

### Fiscal and macroeconomic outcomes and projections
- Public debt and fiscal performance:
  - Public debt: 94 percent of GDP in 2019 (comparison point: initial EFF target of 96 percent by 2020).
  - Capital expenditure: doubled over the last 5 years to reach 3.3 percent of GDP.
  - Social program spending: continually exceeded targets during the SBA.
- Revenue and tax policy:
  - Revenues surpassed budget each year of the SBA due to sound tax policy and tax administration reforms, strategic shift from direct to indirect taxes, reduced tax expenditures, and improved compliance.
- Fiscal stance going forward:
  - Government intends to steer debt toward the legislated 60 percent of GDP ceiling by 2026.
  - GOJ passed a Supplementary Budget in October that maintains the fiscal stance while allowing reallocations (including for road improvements).
  - GOJ committed to completing a new compensation framework by December 2020 to standardize compensation while adhering to the wage bill ceiling.

### Monetary policy and financial sector stance
- Inflation framework and policy:
  - BOJ target range: 4 - 6 percent over the medium term.
  - Authorities expect inflation to track toward the midpoint of the target band, with the balance of risks skewed to the lower end.
  - With policy rates near the zero bound, further room for accommodation is limited; a halt to further rate reductions is considered appropriate.
  - Foreign exchange intervention will be used to smooth unwarranted volatility.
- Financial sector resilience and inclusion:
  - Recent amendments to the Proceeds of Crime Act and Terrorism Prevention Act aim to bolster the AML/CFT regime.
  - BOJ and the Financial Services Commission will continue to strengthen collaboration on consolidated supervision.
  - Financial inclusion priorities include improving access to credit and passage of legislation expected in 2020 (including Microcredit and Credit Union Bills).

### Growth, supply-side reforms, and outlook
- Growth performance:
  - Growth averaged 1.5 percent annually during the last three years.
  - Growth slowed from 2.0 percent in 2018/19 to about 0.7 percent in 2019/20 due to temporary closure of the Alpart alumina refinery for upgrades.
- Policy measures to support growth:
  - 2019/20 fiscal stimulus: lower taxes and sizeable spending increases on infrastructure and crime fighting.
  - Priorities: enhance public safety, improve access to finance, upgrade human capital and physical infrastructure, deepen public sector and governance reforms (including energy sector reforms).
  - Authorities are assessing Petrojam’s fuel pricing mechanism and refinery viability; GOJ is weighing options.

### Institutional strengthening and post-program arrangements
- Main institutional priorities:
  - Strengthen BOJ independence with a clear price stability mandate and modernize governance framework.
  - Establish an independent Fiscal Council through legislation to be tabled in Parliament by April 2020.
  - Develop a National Natural Disaster Risk Financing Policy with World Bank assistance for submission to Parliament by December 2019.
- Post-program monitoring:
  - Jamaica will establish its own targets to facilitate post-program domestic monitoring comparable to a Fund program arrangement.
- Technical assistance:
  - Jamaica will require continued technical support in the post-program period to further strengthen macrofiscal capacity.

### Structural program conditionality status (selected)
- Numerous structural benchmarks and legislative/operational actions were completed or marked "Met", including:
  - Completion and submission of new rates and bands for property taxes using 2013 land valuations (December 31, 2016) — Met.
  - Operationalize Financial System Stability Committee by finalizing appointment of two external members (November 30, 2016) — Met.
  - Consultation paper for the resolution framework issued for public comment (February 28, 2017) — Met.
  - Establish a financial inclusion council for the 2016-20 umbrella financial inclusion strategy (March 31, 2017) — Met.
  - Multiple other actions relating to public sector transformation, consolidation of public bodies, and wage bill controls with specified timetables — implementation status indicated as Met for listed earlier milestones.
- Public bodies domestic arrears cap:
  - The total stock of domestic arrears of specified public bodies will be capped at J$6.4 billion during the program period and monitored on a monthly basis.

### Concluding assessment and policy implications
- Program achievements highlighted:
  - Public debt reduction (to 94 percent of GDP in 2019), improved credit ratings, lower borrowing rates, record-high employment, record-low unemployment, low single-digit inflation, improved external viability, comfortable international reserves, and high consumer and business confidence in 2019.
- Remaining challenges and required policy actions:
  - Lift growth materially above recent averages to increase per capita income and reduce poverty.
  - Continue structural investments in roads, ports, airports, housing, and agricultural infrastructure.
  - Maintain fiscal discipline to keep public debt on a declining path while supporting growth-friendly and priority social spending.
  - Continue public sector transformation and public bodies reform to free up fiscal space.
  - Strengthen institutions (BOJ governance, Fiscal Council, disaster risk financing) to guard against policy slippages in the post-program period.

*Source: 11. Stock of non-borrowed net international reserves (floor) 6/ — Jamaica: IMF country documents and statement excerpts as provided in the content unit.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2019/1jamea2019002.pdf_