## 1jamea2023001 ## Source details **Canonical URL:** [1jamea2023001](https://www.imf.org/-/media/files/publications/cr/2023/english/1jamea2023001.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2023/english/1jamea2023001.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2023/english/1jamea2023001.pdf.json) --- ### Recent developments - Headline inflation: 11.8 percent in April; fell to 9.4 percent in December. Core inflation peaked at 10 percent in June and remained "around 8 ¾ per cent." - Growth and output: - FY2022/23 growth likely around 3½ percent; GDP close to pre-pandemic levels. - Real GDP growth (fiscal-year): 2020/21 Act. -11.0; 2021/22 Act. 8.2; 2022/23 Proj. 3.5; 2023/24 Proj. 2.0. - External sector: - High commodity prices and shortfall in alumina exports widened external deficits. - Current account deficit projected at 2½ percent of GDP in FY2022/23. - Gross international reserves expected at 115 percent of the ARA metric by end-2022. - Financial system resilience: - Capital adequacy of DTIs: about 14 percent in September 2022 (regulatory minimum 10 percent). - NPL ratio: 2.5 percent. - NDTI capital adequacy ratios above minimum thresholds; stable liquidity ratios. - BOJ stress tests indicate resilience to rising global interest rates and tail events. - Public finances: - Public debt declined to 94.2 percent of GDP in 2021/22. - FY2021/22 overall fiscal balance: 0.9 percent of GDP. ### Outlook and risks - Near-term projections (table entries preserved): - Real GDP growth: 2022/23 Proj. 3.5; 2023/24 Proj. 2.0. - Inflation, end of period: 2022/23 Proj. 7.7 percent; 2023/24 Proj. 5.2 percent. - Inflation, average: 2022/23 Proj. 9.5 percent; 2023/24 Proj. 6.5 percent. - Current account (% of GDP): 2022/23 Proj. -2.5; 2023/24 Proj. -2.8. - Gross international reserves (weeks of imports): 2022/23 5.2; 2023/24 5.0. - Public debt (% of GDP): 2022/23 Proj. 84.1; 2023/24 Proj. 77.9. - Medium term: - Growth: converge to potential and about 1¼ percent over the medium term. - Current account: remain high in 2023 then converge to around 1 percent of GDP over the medium term. - Fiscal consolidation: public debt projected to 60 percent of GDP by FY2027/28. - Key downside risks: - Commodity price increases (war in Ukraine), stronger global financial tightening, and new COVID variants. - Other vulnerabilities: - Climate-related risks due to Jamaica’s geographic and socio-economic characteristics. ### Policy assessment and recommendations - Monetary policy: - BOJ followed data-dependent tightening; policy rate increased to 7 percent as of November 2022. - Recommendation: continue data-dependent monetary tightening until inflation is firmly on a path to BOJ’s target range; real policy rate broadly neutral per staff. - Fiscal policy: - Authorities resumed downward debt path after COVID; allowed pass-through of food and fuel prices while providing targeted support (~¼ percent of GDP in temporary transfers in FY2022/23). - Directors recommended maintaining planned path of primary balances to enhance debt sustainability and create fiscal space. - Prioritize climate-resilient infrastructure and investments in health, security, and education within a prudent fiscal envelope. - Strengthen tax and customs administration, public financial management, operationalize the Fiscal Commission, and reform the wage structure. - Financial stability and supervision: - Support ongoing Basel III adoption; deepen FX markets; enhance crisis management and consolidated supervision. - Strengthen AML/CFT framework in line with FATF action plan. - Manage risks associated with central bank digital currency (JAM-DEX). - Structural and inclusion policies: - Multipronged reforms: education and training, infrastructure upgrades, digitalization, crime reduction, trade barrier removal. - Strengthen cash transfer program for social inclusion. - Improve data quality/timeliness and subscribe to SDDS. ### Climate risks and external vulnerabilities - Historical disaster impact: - Hurricanes in early 2000s caused cumulative losses of 11 percent of GDP. - Hurricanes Ivan (2004) and Dean (2007) damages: US$580 million (8 percent of GDP) and US$329 million (3 percent of GDP). - Tropical Storm Nicole (2010): US$239 million (2 percent of GDP). - One-in-100-years event fiscal losses expected to exceed US$1,729 million (roughly about 10 percent of GDP); 1 percent probability in any year that losses exceed US$1,729 million. - Sectoral exposure: - Tourism: about 20 percent of GDP in FX inflows; highly sensitive to natural disasters. - Agriculture and nature-based assets adversely affected by temperature rises, sea-level rise, and volatile precipitation. - Energy exposure: - Over 85 percent of electricity generation derived from fossil fuel. - Fuel commodity imports in FY2021/22 represented 11 percent of GDP and were twice the level of Jamaica’s goods exports. - Jamaica’s GHG contribution in 2020: less than 0.03 percent of total GHG emissions. - Macro implications: - Transitioning away from hydrocarbons would help macroeconomic stability despite up-front imported equipment needs. - Preliminary costing: climate reforms would raise the current account deficit by about 1 percent of GDP annually in the next few years due to higher imports; reforms would have a positive impact on growth but limited by import content; reforms could catalyze FDI and other climate investment (not included in base outlook). ### Climate-related policy framework, DRM, and financing - Institutional and planning commitments: - Vision 2030 Jamaica; Climate Change Policy Framework (2015, updated 2021); Integrated Resource Plan (IRP, 2019); NDC and NDC Implementation Plan (August 2021); National Adaptation Plan under development; LTS to 2050 planned. - DRM instruments and financing: - Contingencies Fund: ceiling raised from J$100 million (US$652 thousand) to J$10 billion in 2019 (US$65.12 million). - National Disaster Fund (NDF): capitalized at US$2.2 million; historical annual injections ~J$500 million (US$3.2 million). - CCRIF coverage up to US$248.7 million; annual premia around US$16mn/year. - CAT bond placed July 2021: US$185 million protection. - Rapid credit facilities: IDB lines (US$285 million remain available) and IMF Rapid Financing Instrument historically used. - Fiscal and planning recommendations: - Integrate climate risks into fiscal planning via quantitative appraisals and climate budget tagging. - Adopt a Disaster Risk Financing (DRF) Policy and constitute a Natural Disaster Reserve Fund (NDRF) under the consolidated fund. - Integrate climate risk assessment in MOFPS PIAB pre-appraisal and appraisal stages for medium/high risk infrastructure. ### Mitigation, renewables, and greening finance - Mitigation and renewables progress: - LED street lighting: replacement reached 80 percent by 2021; upfront cost ~US$30 million with US$25 million funding. - Low-carbon public buses: 20 buses deployed as of 2021; target 136 by 2025; project requires US$30 million financing yet to be secured. - National Tree Planting: about ½ million seedlings planted by end-2021; US$2 million project; further pledges for ¾ million seedlings. - EMEP and EECP: energy efficiency programs supported by IDB, JICA, EU CIF; Energy Efficiency allocation US$22.8 million; Urban Traffic US$3.43 million. - Legislation approved to simplify permitting for renewable power generation and net billing. - Policy recommendations: - Incentives and legislation to attract private investment in renewables. - Expand electric vehicles policy and incentives (Road and rail transportation represented close to 30 percent of petroleum consumption in 2017). - Energy efficiency measures: reduce theft of streetlights, replace bulbs in schools/hospitals, extend public-sector programs to private sector. - Greening the financial sector: - BOJ joined the International Sustainable Banking and Finance Network; engaged with Basel Consultative Group and Association of Supervisors of Banks of the Americas. - Authorities intend to develop a green bond market; institutional framework and disclosure requirements needed. - Suggested supervision capacity building: scenario analysis, climate stress testing, systematic disclosure, improved data collection. - BOJ–AFD green finance project: - Phase 1 (AFD funding): diagnostic, monitoring framework, guidance on data and stress testing. - Phase 2 (EU CIF funding): integrate climate risks in supervision and macroprudential policy over next four years; climate stress tests and monitoring framework. ### Fiscal projections, debt dynamics, and sustainability - Key fiscal-year projections and indicators (selected exact figures): - Budgetary revenue (% of GDP): 2019/20 30.6; 2020/21 29.5; 2021/22 31.0; 2022/23 29.4; 2023/24 29.4. - Budgetary expenditure (% of GDP): 2019/20 29.7; 2020/21 32.6; 2021/22 30.1; 2022/23 29.1; 2023/24 29.1. - Budget balance (% of GDP): 2019/20 1.0; 2020/21 -3.6; 2021/22 0.9; 2022/23 0.3; 2023/24 0.3. - Central government primary balance (% of GDP): 2019/20 3.5; 2020/21 -; 2021/22 6.8; 2022/23 5.8; 2023/24 5.4. - Public debt (FRL definition, percent of GDP): 2019/20 94.3; 2020/21 109.7; 2021/22 94.2; 2022/23 84.1; 2023/24 77.9; 2027/28 59.9. - Debt sustainability and risk assessment: - DSA baseline public debt (Percent of GDP): Actual 2021: 94.28; 2022: 84.17; 2023: 77.97; 2024: 74.07; 2025: 70.06; 2026: 64.45; 2027: 59.95; 2028: 56.45; 2029: 53.84; 2030: 49.94; 2032: 47.3. - Debt fan chart index score: 1.5 (moderate). - GFN financeability index score: 6.4 (below the low-risk threshold of 7.6) — indicates low risk. - Staff: public debt assessed sustainable with high probability; final sustainability qualifier: Sustainable with high probability. - Fiscal Responsibility Law debt target: 60% of GDP by 2027 (FY2027/28). - Large amortization and GFN spikes around 2024, 2028, and 2029 noted; liability management, buybacks, and maturity extension planned. ### External sector projections (selected exact figures) - Current account (percent of GDP, fiscal year): 2019/20 -1.7; 2020/21 -1.1; 2021/22 -1.2; 2022/23 -2.5; 2023/24 -2.8; 2024/25 -2.5; 2025/26 -1.2. - Gross international reserves (US$ millions, fiscal year): 2019/20 3,688; 2020/21 4,244; 2021/22 4,324; 2022/23 4,191; 2023/24 4,100; 2027/28 4,550. - Trade balance (US$ millions): 2019/20 -3,914; 2020/21 -2,742; 2021/22 -3,332; 2022/23 -4,537; 2023/24 -4,573. - Services (net, US$ millions): 2019/20 1,702; 2020/21 -195; 2021/22 901; 2022/23 1,185; 2023/24 1,494. - Travel (net, US$ millions): 2019/20 3,229; 2020/21 637; 2021/22 2,397; 2022/23 3,505; 2023/24 3,710. ### Monetary and financial sector developments - BOJ policy and operations: - Policy rate: increased by 600 basis points since October 2021; at 7 percent as of November 2022. - BOJ mopping up liquidity; maintains market-determined exchange rate with occasional FX intervention. - Policy recommendation: sustain primary surpluses and maintain relatively tight monetary stance until inflation is on target. - Financial supervision and reforms: - Basel III implementation underway: Pillar 1 and revised regulatory capital definition; parallel reporting for a year before mandatory CARs for DTIs. - Implementation of Pillar 2 (ICAAP, SREP, D-SIFI framework) underway; quantitative impact study planned. - BOJ’s supervisory perimeter to expand to credit unions; credit unions to be supervised and subject to prudential requirements. - Resolution framework: strengthen regime for non-viable institutions; draft law for administrative resolution powers for SIFIs planned. - Central bank digital currency (JAM-DEX): - JAM-DEX legal tender; current use limited—0.1 percent of currency in circulation. - Employs encryption, digital signatures, multi-factor authentication; Proceeds of Crime Act and BOJ regulation mitigate financial integrity risks. - Financial soundness: - Banking system deposits growing; private credit recovering. - Depository Institutions retain liquidity above required minimum; moderate profitability. - Capital buffers above minimum; NPL ratio low (2.5 percent). - Securities dealers: capital adequacy about 22 percent; liquid assets 13 percent of total assets. ### AML/CFT status and FATF engagement - Jamaica on FATF grey list since February 2020 with 13 action items in the agreed plan. - Progress as of October/December 2022: - Seven action items for IO1, IO5.1, IO7, and IO10.1 completed. - NRA published August 2021; risk assessment for legal persons included. - Strengthened investigation/prosecution of ML offences and targeted financial sanctions implementation. - Outstanding actions: - Six actions in IO3, IO5 and IO10 incomplete; FATF urged progress before evaluation in February 2023. - Charities Regulations approved December 2022; Companies Act amendments expected Q1 2023 to strengthen beneficial ownership. - BOJ expects to finish processing microcredit applications by Q3 2023; FSC engaging prospective licensees ahead of April application deadline. - Jamaica compliant/largely compliant with 33 out of 40 FATF recommendations; will seek rerating after completing outstanding IO items. ### Capacity development and technical assistance priorities - CD strategy priorities: - Operationalize Fiscal Commission; strengthen macro-fiscal analytical capacity; maintain fiscal discipline to meet FRL debt target. - Strengthen revenue administration, customs modernization (ASYCUDA, JSWIFT), and public financial management. - Support BOJ operationalization of monetary policy committee, FPAS use, and Basel II/III implementation. - AML/CFT capacity building for supervision and legal/regulatory reforms. - Statistics: update SUT, produce quarterly expenditure-based GDP, reweight CPI/PPI, improve BOP/IIP and monetary/financial statistics. - IMF and partners’ CD engagements noted across FAD, MCM, STA, LEG, CARTAC, IDB, WB. ### Implementation to date and priorities going forward (selected) - Fiscal and PFM: - Contingencies Fund ceiling increased to J$10 billion in 2019 (US$65.12 million). - PIAB templates require CCORAL screening at project concept stage; C-PIMA ongoing. - Plans to adopt climate budget tagging with IDB support. - Mitigation & renewables implementation highlights: - LED street lighting: 80 percent replacement by 2021. - Low-carbon buses: 20 deployed by 2021; target 136 by 2025. - National Tree Planting: ~½ million seedlings planted by end-2021. - Priorities: - Integrate climate risks into fiscal planning and PPP frameworks; adopt DRF Policy; establish NDRF; include climate risk in public investment appraisal. - Develop green bond market and strengthen supervision for climate-related financial risks. - Continue structural reforms to address supply-side constraints: education, infrastructure, crime reduction, trade facilitation, and improved data. ### Selected key statistics (exact figures) - Population (2019): 2.73 million. - Per capita GDP (2019): US$5729. - Unemployment rate (July 2022): 6.6%. - Capital adequacy of DTIs: about 14 percent (September 2022). - NPL ratio: 2.5 percent. - IMF-related indicators (Outstanding IMF Credit, Millions of SDRs): 2022 558.4; 2023 381.0; 2024 133.5; 2025 9.4; 2026 0.0. *Source: IMF staff report for Jamaica, Article IV Consultation, January 19, 2023 (selected chapter and tables).* ### 2023. High commodity prices have resulted in an increase in the current account deficit. ### 2023. High commodity prices have resulted in an increase in the current account deficit. ### Recent developments - High food and energy prices pushed headline inflation to 11.8 percent in April; headline inflation fell to 9.4 percent in December. Core inflation peaked at 10 percent in June and remained around "around 8 ¾ per cent." - The economy continued a gradual recovery, supported by rebounds in tourism; FY2022/23 growth is likely to be around 3½ percent, with GDP close to pre-pandemic levels. - High commodity prices and a shortfall in alumina exports widened external deficits: the current account deficit was projected at 2½ percent of GDP in FY2022/23. - International reserves were expected to remain adequate, at 115 percent of the ARA metric by end-2022. - The financial system remained well-capitalized and liquid: - Capital adequacy of Deposit Taking Institutions (DTIs) was about 14 percent in September 2022 (regulatory minimum 10 percent). - NPL ratio was 2.5 percent (below the 5-year pre-pandemic average). - Non-deposit taking financial institutions (NDTI) showed capital adequacy ratios above minimum thresholds and stable liquidity ratios. - BOJ stress tests indicate resilience to rising global interest rates and tail events. - Public debt declined to 94.2 percent of GDP in 2021/22, reversing the COVID-era increase. FY2021/22 overall fiscal balance was 0.9 percent of GDP. ### Outlook and risks - Near-term outlook: - Growth: Real GDP growth projected 3.5 percent for 2022/23 and 2.0 percent for 2023/24 (table entries: 2022/23 Proj. 3.5; 2023/24 Proj. 2.0). - Inflation: Inflation, end of period projected 7.7 percent for 2022/23 and 5.2 percent for 2023/24; inflation, average projected 9.5 percent for 2022/23 and 6.5 percent for 2023/24. - Current account: Current account (% of GDP) projected -2.5 for 2022/23 and -2.8 for 2023/24. - Gross international reserves: 5.2 weeks of imports in 2022/23 and 5.0 weeks in 2023/24. - Public debt: public debt (% of GDP) projected 84.1 for 2022/23 and 77.9 for 2023/24. - Medium term: - Growth is expected to converge to potential and about 1¼ percent over the medium term. - Current account deficit expected to remain high in 2023 then converge to around 1 percent of GDP over the medium term. - Fiscal consolidation is projected to bring public debt to 60 percent of GDP by FY2027/28. - Key downside risks: - The war in Ukraine could push commodity prices higher, increasing inflationary pressures and interest rates, worsening fiscal accounts, and weakening growth. - A stronger-than-envisaged tightening of global financial conditions could curb capital flows, reduce remittances, pressure the currency, raise budget financing costs, and weaken financial sector profitability. - New COVID variants could disrupt tourism, trade, and capital flows. - Other vulnerabilities: - Climate-related risks due to Jamaica’s geographic and socio-economic characteristics require adaptation and resilience measures. ### Policy assessment and recommendations - Monetary policy: - The Bank of Jamaica followed a data-dependent tightening to counter inflationary impulses from demand recovery and global price increases. - Continued data-dependent monetary policy tightening is advised to curb inflation and support debt sustainability. - Fiscal policy: - Authorities responded to COVID with nimble fiscal support in 2020 and quickly resumed a downward debt path as the pandemic faded. - The response to food and fuel price surges allowed full pass-through while providing targeted support to the poor within the existing fiscal envelope. - Directors recommended maintaining the planned path of primary balances to enhance debt sustainability and create fiscal space for future shocks. - The prudent fiscal envelope should identify resources for climate-resilient infrastructure and investments in health, security, and education. - Continued improvement of fiscal policy framework is welcome, including strengthening tax and customs administration, public financial management systems, operationalizing the Fiscal Commission, and reforming the wage structure to simplify the system and reward performance. - Financial stability and supervision: - Support for ongoing reforms adopting Basel III regulatory standards and bolstering supervision. - Need to enhance crisis management, consolidated supervision, and the AML/CFT framework in line with the action plan agreed with FATF. - Calls to deepen FX markets and refine the macroprudential framework. - Central bank digital currency adoption shows nascent benefits for financial inclusion; risks should be managed. - Structural and inclusion policies: - Multipronged approach to overcome growth constraints: strengthen education and training, upgrade infrastructure, digitalize government services, reduce crime, and remove barriers to trade. - Strengthen the cash transfer program to support social inclusion. - Improve data quality and timeliness and subscribe to the SDDS to support evidence-based policymaking. - Climate change: - Reform priorities to build resilience: strengthen physical and fiscal resilience, incentivize renewable energy generation, reduce energy consumption, develop markets for “green” financial instruments, and properly recognize and manage climate risks to catalyze private financing for climate investments. - Continued collaboration with international organizations encouraged. ### Key statistics (selected, as reported) - Population (2019): 2.73 million - Per capita GDP (2019): US$5729 - Unemployment rate (July 2022): 6.6% - Fiscal year indicators (Act./Proj. basis): - Real GDP growth (%) 2020/21 Act. -11.0; 2021/22 Act. 8.2; 2022/23 Proj. 3.5; 2023/24 Proj. 2.0 - Unemployment (%) 2020/21 Act. 8.9; 2021/22 Act. 6.2 - Inflation, end of period (%) 2020/21 Act. 5.2; 2021/22 Act. 11.3; 2022/23 Proj. 7.7; 2023/24 Proj. 5.2 - Inflation, average (%) 2020/21 Act. 5.0; 2021/22 Act. 7.4; 2022/23 Proj. 9.5; 2023/24 Proj. 6.5 - Budgetary revenue (% of GDP) 29.5; 31.0; 29.4; 29.4 (for 2020/21, 2021/22, 2022/23 Proj., 2023/24 Proj.) - Budgetary expenditure (% of GDP) 32.6; 30.1; 29.1; 29.1 - Budget balance (% of GDP) -3.6; 0.9; 0.3; 0.3 - Central government primary balance (% of GDP) 3.5; 6.8; 5.8; 5.4 - Public sector balance (% of GDP) -3.6; 0.9; 0.3; 0.3 - Public debt (% of GDP) 109.7; 94.2; 84.1; 77.9 - Broad money (% of GDP) 74.4; 70.4; 68.4; 68.2 - Credit to the private sector (% of GDP) 57.7; 52.9; 51.6; 51.9 - Current account (% of GDP) -1.1; -1.2; -2.5; -2.8 - FDI, net (% of GDP) 1.3; 1.9; 2.3; 2.7 - Gross international reserves (weeks of imports) 9.0; 6.4; 5.2; 5.0 - External debt (% of GDP) 103.9; 92.6; 82.7; 77.6 - Capital adequacy of DTIs: about 14 percent in September 2022 (regulatory minimum 10 percent). - NPL ratio: 2.5 percent. *Source: IMF staff report for Jamaica, Article IV Consultation, January 19, 2023.* ### 10. Climate risks can undermine the strength ### 10. Climate risks can undermine the strength of Jamaica’s external position ### Climate risks and external vulnerabilities - Natural disasters have inflicted significant damage on the economy over the past decades. Hydrometeorological events have been the most prominent, with two hurricanes in the early 2000s causing cumulative losses of 11 percent of GDP. - The tourism sector—which provides about 20 percent of GDP in FX inflows—is highly sensitive to the increased severity and frequency of natural disasters. - Natural disasters also erode nature-based assets and negatively impact the agricultural sector (which is already coping with rising temperatures and sea levels and more volatile precipitation patterns). - Jamaica’s contribution to global emissions is negligible, but the country is dependent on imported petroleum products to meet over 85 percent of its electricity generation needs, making Jamaica susceptible to volatility in commodity prices and undermining the strength of Jamaica’s external position. - Transitioning away from hydrocarbons would help macroeconomic stability, even with the required up-front investment in imported equipment. ### Key macro projections and indicators (staff estimates and projections) - Growth and Prices: - GDP growth: -0.1-11.08.23.52. 01.81.51.31.3 - Consumer price inflation (e.o.p.): 4.85.211.37.75. 24.55.05.05.0 - Government Finances: - Central government revenue: 30.629.531.029.429.429.429.429.529.6 - Central government expenditure: 29.732.630.129.129.129.127.927.027.1 - Public sector overall balance: 1.0-3.60.90.30.30.31.52.52.5 - Consolidated public sector debt: 94.3109.794.284.177.974.070.064.459.9 - Balance of Payments: - Current account: -1.7-1.1-1.2-2.5-2.8-2.5-1.2-1.2-1.2 - Foreign direct investment: 0.81.31.92.32.72.83.03.03.0 - Gross reserves (US$million): 3,6884,2444,3244,1914,1004,2504,3504,4504,550 Sources: Jamaican authorities and Fund staff estimates and projections. ### Short-term policies and outlook - FY2021/22: - Fiscal overperformance driven by buoyant consumption taxes, high dividend transfers, and sluggish capital spending. - FY2022/23: - Expected overall fiscal surplus of 0.3 percent of GDP as stipulated in the MTFF, bringing public debt to 84 percent of GDP. - Authorities provided around ¼ percent of GDP in temporary transfers to needy families—mainly through vouchers and transfers to students under social programs. - FY2023/24 budget: - Targets a primary surplus close to 5½ percent of GDP. - Would bring public debt to 78 percent of GDP by FY2023/24. - Predicated on strict control of primary spending and maintaining revenues through improved tax administration. - Medium-term forecast: - Public debt is forecast to fall to 60 percent of GDP by FY 2027/28, in line with the Fiscal Responsibility Law (FRL, Annex V). ### Monetary policy stance - The BOJ increased the policy rate to 7 percent as of November 2022. - The BOJ is mopping up liquidity and maintaining a market-determined exchange rate, supported by occasional FX intervention to limit volatility. - Staff’s inflation projections imply the real policy rate is broadly neutral. - Continuing data-dependent tightening combined with a prudent fiscal stance is expected to bring inflation back to the target range by end-2023 (staff assessment). - Policy recommendation: sustain primary surpluses and maintain a relatively tight monetary stance until inflation is firmly on the path to the BOJ’s target range to secure debt sustainability and fiscal space. ### Medium-term fiscal framework and public financial management - Fiscal institutions and debt management: - Parliament established an independent Fiscal Commission (FC) to assess realism of government fiscal plans and consistency with the FRL; government is undertaking last steps to staff the FC. - Authorities have managed debt structure via buybacks of expensive liabilities and lengthening maturities through issuance of global bonds. - Revenue administration: - At 26 percent of GDP, tax revenue compares favorably with peers; no tax policy changes planned. - Transition to a new information system to improve compliance, cross-check data, and track taxpayers. - Customs modernization through IT improvements, risk management, and post-clearance audits; rollout of ASYCUDA and JSWIFT. - A new Customs Act is before Parliament to enhance customs clearance and revenue collection. - Public financial management gaps: - Improvements include integrating public bodies into reporting systems, strengthening cash management, and reporting fiscal risks. - Weaknesses remain in recording and managing expenditure and revenue arrears; commitment controls and medium-term budgeting for program spending need strengthening. - Public wage reform: - Allowances are being eliminated to create a standardized pay structure; reform phased in over three years. - About two-thirds of the fiscal cost will be met by reducing wage allowances; remainder offset by reduced travel, digitalization savings, and lower tax expenditures associated with elimination of allowances. - Spending priorities over the medium term: - Prioritize security, health, education, and climate-change adaptation, including infrastructure resilient to natural disasters. - Authorities intend to meet needs by improving tax collection and reallocating resources within the budget. ### Financial stability and supervision - Basel III and regulatory updates: - Authorities implementing Basel III capital requirements under Pillar 1 and revised regulatory capital definition; parallel reporting for a year before mandatory CARs for DTIs. - Implementation of Pillar 2 (ICAAP, SREP, framework for designating Domestic Systemically Important Financial Institutions) is underway; quantitative impact study to be undertaken for designated institutions. - Pillar 3 to focus on market disclosures and implementation of additional capital and liquidity requirements including capital buffers and the Net Stable Funding Ratio. - Supervision scope: - BOJ’s supervision authority will be expanded to incorporate credit unions; credit unions will be supervised by the BOJ and subject to comprehensive prudential requirements. - BOJ intensifying supervisory efforts for Financial Holding Companies and consolidated supervision; pilot and licensing of FHCs underway. - Authorities intend legislative amendments to empower the Financial Services Commission (FSC) to undertake consolidated supervision of financial groups not including DTIs. - Resolution framework: - The regime for resolution of non-viable financial institutions should be strengthened; a Technical Working Group intends to establish methodology to identify systemically important institutions and prepare a draft law for administrative resolution powers for SIFIs and modify insolvency process for non-systemic institutions. - Climate-related financial risks: - Financial institutions have credit exposure to sectors affected by weather-related events (agriculture, tourism and the distribution sector, together 17 percent of the loan portfolio). - Decarbonization and global asset price volatility from climate change could increase credit risks and negatively affect balance sheets of Jamaican financial institutions. - Central bank digital currency (JAM-DEX): - JAM-DEX constitutes legal tender; aims to boost financial inclusion and enhance the payment system. - Current use is still limited—0.1 percent of currency in circulation. - Employs encryption, digital signatures, multi-factor authentication; financial integrity risks mitigated by the Proceeds of Crime Act and BOJ regulation of wallet providers. - An independent BOJ-commissioned assessment concluded adequate controls are in place. ### AML/CFT framework (Box 1 summary) - Jamaica is on FATF’s list of jurisdictions under increased monitoring (grey list) since February 2020 and agreed an action plan comprising 13 action items for five immediate outcomes rated at moderate/low effectiveness in the 2017 Mutual Evaluation Report. - Progress noted by FATF in October 2022: - Seven action items for IO1, IO5.1, IO7, and IO10.1 have been completed. - NRA published in August 2021; risk assessment for legal persons included in NRA. - Strengthened investigation/prosecution of ML offences and implementation of targeted financial sanctions with increased coordination among authorities. - Outstanding actions and timelines: - Six actions in IO3, IO5 and IO10 assessed as incomplete; FATF urged progress before evaluation in February 2023. - December 2022: Parliament approved Charities Regulations authorizing RBS of the NPO sector; work on IO3 continues with microfinance and TCSP placements under supervision progressing. - BOJ expects to finish processing applications for microcredit institutions by Q3 2023; FSC engaging prospective licensees ahead of April application deadline. - Amendments to the Companies Act expected to be tabled in Q1 2023 to strengthen beneficial ownership (BO) regime. - Jamaica is compliant/largely compliant with 33 out of 40 FATF recommendations and will seek rerating of the remaining seven after completing outstanding IO action items. *Source: IMF staff and Jamaican authorities (excerpts from the chapter).* ### 32. The authorities emphasized that further strengthening the sound policy framework ### 1jamea2023001 - 32. The authorities emphasized that further strengthening the sound policy framework ### Strengthening the policy and financial oversight framework - Authorities committed to pursuing further reforms at appropriate points in time and agreed that continuous monitoring of financial sector risks is important. - Ongoing and planned measures: - Reforms to the foreign exchange trading infrastructure have deepened the market and improved price discovery. - Ongoing adoption of the Basel framework. - Approval of the special resolution regime for financial institutions. - Expansion of the supervisory perimeter of the BOJ and progress with consolidated financial supervision. - Advancing adoption of the AML/CFT reforms agreed with FATF remains a priority. - Staff recommendation highlights: - Further deepen FX markets by gradually reducing surrender requirements and aligning Net Open Position limits with macroprudential objectives. - Continue efforts to improve crisis management, consolidated supervision, and the AML/CFT framework. - Support for the authorities’ request concerning the existing MCP, noting the measure is imposed for non-balance of payments reasons and “does not materially impede balance of payment adjustments, harm the interest of other members, or discriminate among members.” ### Supporting inclusive growth — diagnosis of supply-side constraints - Key impediments to growth: - Deficiencies in physical and human capital, the business environment, and access to international markets. - Linked factors: (i) crime increasing security costs and deterring tourism and investment; (ii) insufficient years of schooling and outward migration of university graduates; (iii) poor infrastructure, particularly in logistics and energy; (iv) complex business procedures and insufficient access to financing for small and medium enterprises; and (v) competition from countries with easier access to North American markets. - Multipronged policy areas and measures: - Poverty and inequality: strengthen PATH by improving targeting; PATH supports vulnerable groups through cash transfers, education grants, and job training. - Reduce crime: government strategy prioritizes (i) effective policing; (ii) swift justice processes; (iii) social development to address risk factors; (iv) crime prevention; (v) community reintegration for offenders. Government has requested U.S. support, including intelligence sharing and joint investigation of criminal networks. - Improve education and training: expand school meals program, improve rural transportation, invest in teacher quality and information technology. - Strengthen infrastructure: improve resilience of transportation and water infrastructure; reduce generation and transmission costs and losses in electricity; improve reliability; advance transition to renewables. - Lessen business costs and barriers to international trade: streamline customs procedures; reduce trade barriers including through free trade agreements; Special Economic Zones tax-code amendments expected to foster investment in business process outsourcing. - Institutional quality and data: - Jamaica scores relatively strong on Voice and Accountability and Government Effectiveness; other governance areas at world median. - Following the new procurement law, further reforms to require publication of beneficial ownership information of awarded companies would enhance transparency. - Data adequacy: steps to subscribe to SDDS recommended; deficiencies include industrial production, labor market wages and earnings, and coverage of fiscal accounts at the general government level. A diagnosis will be conducted jointly with the IMF’s Statistics Department. ### Addressing climate change challenges — strategic framework and progress - Institutional and planning commitments: - National Development Plan provides framework; energy sector plan focuses on mitigation; water sector strategy focuses on resilient water infrastructure. - Nationally Determined Contribution (NDC) and sectoral plans outline adaptation and mitigation strategy. - Authorities developing a National Adaptation Plan and plan to develop a strategy for Low Carbon Emissions and Climate Resilient Development (LTS) to 2050. - Note: In August 2021 authorities—with support from the WB and the NDC partnership—developed an NDC implementation plan; sectoral plans are recent and at early stage, so outputs and impact are not measurable yet. - Key areas for further efforts (summary; detailed in Annex III): - Adaptation (physical and fiscal resilience) - Mitigation and promoting renewables - Greening the financial sector ### Adaptation: building physical and fiscal resilience - Programs and instruments: - Comprehensive Disaster Management program (CDM) introduced measures to minimize damage, amplify relief response, design recovery and rehabilitation, and limit adverse impacts of natural disasters; social safety net designed for quick humanitarian response after natural disaster. - Fiscal framework enhancements: legal and institutional arrangements for swift, cost-effective financial response to natural disasters; tracking system for disaster-related expenditures; MOFPS issued post-disaster budget execution guidelines; with IDB support, MOFPS developing road map to implement climate budget tagging reform. - Comprehensive financing framework includes: Contingencies Fund, National Disaster Fund (NDF), the Caribbean Catastrophic Risk Insurance Facility Segregated Portfolio Company (CCRIF-SPC), the catastrophe (CAT) bond, and rapid credit facilities. - Key fiscal and risk figures: - Coverage provided of approximately 5 percent of GDP appears adequate—losses from previous natural disasters have spanned 3-8 percent of GDP. - Regulatory and planning tools: - 2018 National Building Code supports green and resilient investments. - Green Coastal Urban Renewal plan initiated focusing on waterfront renewal. - Recommended fiscal policy improvements: - Integrate climate risks into fiscal planning via quantitative appraisals of disaster risks under different climate change scenarios. - Promote private participation in bearing climate risks via PPP policy revision to include climate requirements and distribute contingent liabilities through comprehensive insurance. - Adopt a Disaster Risk Financing (DRF) Policy to inform selection of ex-ante financing mechanisms. - Constitute a Natural Disaster Reserve Fund (NDRF) under the consolidated fund for catastrophic national events. - Integrate climate considerations in public investment appraisal: MOFPS PIAB to include climate risk assessment at pre-appraisal and appraisal stages for medium/high risk infrastructure projects. ### Mitigation and promoting renewables - Progress to date: - Shifting street lighting to energy efficient LED bulbs and deploying low-carbon public buses—supported by the IDB. - National Tree Planting Program started but requires further financing. - Energy Efficiency and Conservation Program (EECP) supports retrofitting government facilities; Energy Management and Efficiency Programme (EMEP) promotes energy efficiency. - Legislation approved to simplify permitting for renewable power generation and sale of surpluses to the national grid (net billing). - Recommended policy measures: - Incentives for investment in renewables through legislation and fiscal measures to attract private investment. - Electric vehicles policy to expand incentives and reduce dependence on fossil fuels (note: Road and rail transportation represented close to 30 percent of petroleum consumption in 2017). - Energy efficiency measures including procedures to reduce theft of streetlights, replace lightbulbs in schools and hospitals with low energy alternatives, and extend public-sector energy conservation programs to the private sector. ### Greening the financial sector - Engagements and capacity building: - BOJ engaged with: (i) the International Sustainable Banking and Finance Network to develop capacity to monitor climate risks; (ii) the Basel Consultative Group to expedite adoption of supervision of climate risks; (iii) the Association of Supervisors of Banks of the Americas to benefit from shared experiences. - Authorities intend to develop a green bond market. - Needed developments: - Institutional framework for green bonds to catalyze private and other financing for climate projects. - Strengthen capacity for supervision and develop risk-management guidelines for financial institutions, including scenario analysis and stress testing. - Require systematic disclosure of climate-risks and improve data collection to support monitoring. - Economic impacts and scenario note: - Preliminary costing suggests reforms would raise the current account deficit over the next few years by about 1 percent of GDP annually due to a larger import bill and trade deficit. - Reforms would have a positive impact on growth, though limited by the import content of potential investments. - Reforms can catalyze further multilateral and private capital through FDI and other climate investment (not included in the outlook of this report). ### Authorities’ views - Authorities concur that multifaceted challenges to growth require priority on fostering growth. - Emphasis on macroeconomic stability and securing debt sustainability to strengthen growth prospects. - Structural reforms expected to change the growth trend; focus on reducing volatility from recurrent crises and lowering financing costs. - Authorities agree with staff analysis on climate issues and view climate reforms as potentially reducing growth volatility. ### Staff appraisal — macroeconomic and policy assessment - Achievements and current stance: - Jamaica reduced public debt, inflation, and external deficits; institutionalized fiscal discipline through a Fiscal Responsibility Law (FRL); adopted inflation targeting and a floating exchange rate; built international reserves; strengthened financial oversight. - Economy on a gradual post-pandemic recovery supported by rebound in tourism and spillovers. - External position assessed broadly in line with medium-term fundamentals and desirable policies; international reserves adequate. - Risks: - Higher commodity prices, tighter-than-envisaged global financial conditions, new COVID outbreaks, and natural disasters. - Fiscal policy priorities: - Maintaining the currently planned path for the primary balance remains essential to decreasing public debt over the medium term. - Large primary surpluses in the MTFF and authorities’ commitment to ongoing monetary policy tightening should enhance debt sustainability, curb inflation, and create space to respond to future shocks. - Within the prudent fiscal envelope, resources need to be identified for climate-resilient infrastructure and investments in health, security and education. - Institutional recommendations: - Fiscal Commission to strengthen fiscal responsibility framework through independent assessment of consistency of policies with the FRL. - Continue strengthening tax and customs administration and public financial management systems. - Reforms to deepen FX markets and further expand supervisory perimeter to credit unions noted as important. - Supply-side reform priorities: - Improve education and training to better match labor market needs. - Upgrade infrastructure, logistics, and digitalization of government services. - Shift energy generation towards renewables. - Continue policing and community engagement to reduce crime. - Lower barriers to trade. - Strengthen cash transfer program for social inclusion. - Improve data quality and timeliness to meet SDDS requirements. *Source: IMF staff and authorities’ chapter text.* ### 56. Reforms to address the challenges posed by climate change can reduce long-term ### Reforms to address the challenges posed by climate change can reduce long-term vulnerabilities ### Climate change: recommended reforms and expected effects - Reforms should build on Jamaica’s NDCs and a preliminary work on a national adaptation strategy. - Policy aims: - Enhance policy frameworks to strengthen physical and fiscal resilience. - Create incentives to increase renewable sources of energy and reduce energy consumption. - Develop markets for green financial instruments. - Ensure that climate risks are properly recognized and managed by financial intermediaries. - Expected effect: - Reducing Jamaica’s susceptibility to natural disasters and other negative effects of climate change would help catalyze private sector financing for climate-related investment in many areas. ### Procedural recommendation - It is recommended that the next Article IV consultation takes place on the standard 12-month cycle. ### Real sector developments (selected findings) - After the massive contraction in 2020, the economy is gaining momentum. - Unemployment has fallen to historic lows. - Tourism and hospitality industry have rebounded. - Most sectors have picked up, except mining. - Output gap is closing. - Inflation, while receding, remains above the target band. ### Fiscal sector developments (selected findings) - Central government fiscal balance is back in surplus. - Tax revenues are buoyant while total spending was contained. - Higher tax revenues were the result of strong GST collections. - The decline in spending was mainly from reduction in wage bill after the spike from pandemic related needs. - Capital spending continued to remain subdued. - Public debt is on a solid downward path to meet the FRL debt target. ### External sector developments (selected findings) - Remittances receipts again boosted the CA balance in 2021 but are falling in 2022. - Tourism—especially from the US—has started to recover. - The trade balance has declined amid below-average mining exports. - COVID hit FDI inflows, but existing tourism projects continued to be executed. - The real effective exchange rate depreciated by 4 percent in 2021 but has appreciated in the first half of 2022. ### Monetary and financial sector developments (selected findings) - Banking system deposits have been growing steadily with individuals and businesses dominating. - Private credit continues to grow reflecting post-Covid rebound. - Depository Institutions retain liquidity above required minimum with moderate profitability. - The NPL ratio is very low with sufficient provisioning. - Capital buffers are kept well above the minimum and sufficient to absorb potential losses. ### Key statistics and projections (selected exact figures) - Population (2019): 2.73 million - Per capita GDP (2019): US$5729 - Unemployment rate (July 2022): 6.6% - Fiscal-year Real GDP: 2019/20: -0.1; 2020/21: -11.0; 2021/22: 8.2; 2022/23: 3.5; 2023/24: 2.0; 2024/25: 1.8; 2025/26: 1.5; 2026/27: 1.3; 2027/28: 1.3 - Fiscal-year Nominal GDP growth: 2019/20: 3.3; 2020/21: -8.1; 2021/22: 19.2; 2022/23: 11.5; 2023/24: 7.3; 2024/25: 6.4; 2025/26: 6.6; 2026/27: 6.4; 2027/28: 6.4 - Consumer price index (end of period, fiscal year): 2019/20: 4.8; 2020/21: 5.2; 2021/22: 11.3; 2022/23: 7.7; 2023/24: 5.2; 2024/25: 4.5; 2025/26: 5.0; 2026/27: 5.0; 2027/28: 5.0 - Budgetary revenue (percent of GDP): 2019/20: 30.6; 2020/21: 29.5; 2021/22: 31.0; 2022/23: 29.4; 2023/24: 29.4; 2024/25: 29.4; 2025/26: 29.4; 2026/27: 29.5; 2027/28: 29.6 - Budget balance (percent of GDP, fiscal year): 2019/20: 1.0; 2020/21: -3.6; 2021/22: 0.9; 2022/23: 0.3; 2023/24: 0.3; 2024/25: 0.3; 2025/26: 1.5; 2026/27: 2.5; 2027/28: 2.5 - Public debt (FRL definition, percent of GDP): 2019/20: 94.3; 2020/21: 109.7; 2021/22: 94.2; 2022/23: 84.1; 2023/24: 77.9; 2024/25: 74.0; 2025/26: 70.0; 2026/27: 64.4; 2027/28: 59.9 - Current account balance (percent of GDP, fiscal year): 2019/20: -1.7; 2020/21: -1.1; 2021/22: -1.2; 2022/23: -2.5; 2023/24: -2.8; 2024/25: -2.5; 2025/26: -1.2; 2026/27: -1.2; 2027/28: -1.2 - Gross international reserves (US$ millions, fiscal year): 2019/20: 3,688; 2020/21: 4,244; 2021/22: 4,324; 2022/23: 4,191; 2023/24: 4,100; 2024/25: 4,250; 2025/26: 4,350; 2026/27: 4,450; 2027/28: 4,550 - Current Account (US$ millions, calendar/fiscal-table): 2019/20: -261; 2020/21: -149; 2021/22: -176; 2022/23: -418; 2023/24: -504; 2024/25: -475; 2025/26: -243; 2026/27: -243; 2027/28: -251 - Trade balance (US$ millions): 2019/20: -3,914; 2020/21: -2,742; 2021/22: -3,332; 2022/23: -4,537; 2023/24: -4,573; 2024/25: -4,780; 2025/26: -4,858; 2026/27: -5,077; 2027/28: -5,309 - Exports (f.o.b., US$ millions): 2019/20: 1,531; 2020/21: 1,253; 2021/22: 1,421; 2022/23: 1,671; 2023/24: 1,749; 2024/25: 1,785; 2025/26: 1,815; 2026/27: 1,851; 2027/28: 1,900 - Imports (f.o.b., US$ millions): 2019/20: 5,445; 2020/21: 3,995; 2021/22: 4,753; 2022/23: 6,208; 2023/24: 6,322; 2024/25: 6,565; 2025/26: 6,674; 2026/27: 6,929; 2027/28: 7,209 - Services (net, US$ millions): 2019/20: 1,702; 2020/21: -195; 2021/22: 901; 2022/23: 1,185; 2023/24: 1,494; 2024/25: 1,732; 2025/26: 1,993; 2026/27: 2,167; 2027/28: 2,343 - Travel (net, US$ millions): 2019/20: 3,229; 2020/21: 637; 2021/22: 2,397; 2022/23: 3,505; 2023/24: 3,710; 2024/25: 3,899; 2025/26: 4,096; 2026/27: 4,252; 2027/28: 4,396 ### Central government operations (selected fiscal-year figures, exact) - Budgetary revenue and grants (millions of J$): 2019/20: 649,759; 2020/21: 575,404; 2021/22: 720,224; 2022/23: 760,306; 2023/24: 817,106; 2024/25: 869,245; 2025/26: 926,751; 2026/27: 989,121; 2027/28: 1,056,681 - Tax (millions of J$): 2019/20: 579,397; 2020/21: 505,685; 2021/22: 616,368; 2022/23: 682,062; 2023/24: 733,147; 2024/25: 779,929; 2025/26: 831,526; 2026/27: 887,597; 2027/28: 948,439 - Budgetary expenditure (millions of J$): 2019/20: 630,354; 2020/21: 635,911; 2021/22: 698,895; 2022/23: 752,800; 2023/24: 809,051; 2024/25: 860,381; 2025/26: 879,498; 2026/27: 905,322; 2027/28: 967,366 - Interest (millions of J$): 2019/20: 94,396; 2020/21: 91,470; 2021/22: 94,396; 2022/23: 129,038; 2023/24: 131,400; 2024/25: 130,900; 2025/26: 127,900; 2026/27: 127,637; 2027/28: 114,816 - Budget balance (millions of J$): 2019/20: 20,528; 2020/21: -69,507; 2021/22: 21,329; 2022/23: 7,506; 2023/24: 8,055; 2024/25: 8,864; 2025/26: 47,253; 2026/27: 83,799; 2027/28: 89,315 ### IMF-related indicators (selected exact figures) - Outstanding IMF Credit (Millions of SDRs): 2022: 558.4; 2023: 381.0; 2024: 133.5; 2025: 9.4; 2026: 0.0; 2027: 0.0; 2028: 0.0; 2029: 0.0; 2030: 0.0 - Fund Obligations Based on Existing Credit (Principal, millions of SDRs): 2022: 18.8; 2023: 177.5; 2024: 247.5; 2025: 124.1; 2026: 9.4; 2027: 0.0; 2028: 0.0; 2029: 0.0; 2030: 0.0 - Total Obligations Based on Existing Credit (Millions of SDRs): 2022: 18.8; 2023: 208.6; 2024: 270.9; 2025: 139.5; 2026: 22.5; 2027: 12.8; 2028: 12.8; 2029: 12.8; 2030: 12.8 *Source: Jamaica — IMF staff report (selected chapter and tables).* ### Annex I. Progress on 2021 Article IV Policy Recommendations ### Annex I. Progress on 2021 Article IV Policy Recommendations ### Growth Agenda - Recommendation: Improve social outcomes and foster inclusive growth by addressing supply side constraints to growth through well prioritized structural reforms; make the economy more competitive and resilient. - Policy actions (status): - Ongoing. Increased allocations have been made to prevent crime, enhance information network and mobility for security units. - Additional resources have been allocated for crime prevention and reduction, youth education, training and development and women’s programs to address deficiencies in social outcomes. ### Fiscal Sector - Recommendation: Maintain a tight fiscal stance to preserve debt sustainability. - Policy action: The FY2022/23 budget maintains tight fiscal discipline and debt is on a solid downward trajectory to meet FRL debt target. - Recommendation: Reduce the wage bill and reprioritize spending toward growth-enhancing projects. - Policy action: Ongoing. Reevaluation of allowances is part of the planned overhaul of the public compensation structure that the Government has announced in the FY2022/23 budget. - Recommendation: Improve public sector efficiency through divestments and addressing duplication and inefficiencies in government functions. - Policy action: Ongoing. Several public bodies have been closed, merged, and reintegrated into central government; earmarked revenues from several entities have been directed into the Consolidated Fund. The authorities continue to assess further opportunities for divestment. ### Monetary and Financial Sector - Recommendation: Formalize the current inflation targeting regime to help entrench macroeconomic stability and promote growth; further tightening of monetary policy to firmly anchor inflation expectations. - Policy actions: - The BOJ independence Act sets the BOJ’s primary objective to be price stability, strengthens BOJ’s institutional independence and accountability, puts in place an effective Board with decision-making structure, and restores autonomy to the central bank. - Central bank has already increased policy rate by 600 basis points since October 2021. - Recommendation: Maintain exchange rate flexibility. - Policy action: The BOJ continues to shrink its role in FX markets. Exchange rate flexibility continues, with FX intervention limited to periods of excessive volatility. - Recommendation: Preserve financial sector stability to promote growth. - Policy actions (ongoing): - The BOJ continues to work on the implementation of Basel III criteria and the expansion of the regulatory perimeter (credit unions). - Work is ongoing on crisis management (Special Resolution Regime) and consolidated supervision issues. - Prudential and supervisory improvements are being enhanced for systemic stability with MCM TA. - Changes to investment limits for non-banks is being considered to safeguard financial stability with MCM TA. - Recommendation: Address weaknesses in AML/CFT framework. - Policy action: Work is ongoing with TA from LEG/MCM. ### Risk Assessment Matrix — External Risks - Commodity price shocks. (↓) - Likelihood: High - Impact if realized: Medium - Description: A combination of continuing supply disruptions (e.g., due to conflicts and export restrictions) and negative demand shocks causes recurrent commodity price volatility and social and economic instability. - Policy response: Provide targeted support to vulnerable households and firm while preserving fiscal sustainability. Continue to allow pass-through from international prices to domestic ones. - Abrupt global slowdown or recession. (↓) - Likelihood: High - Impact if realized: Medium - Description: Sharp tightening of global financial conditions combined with volatile commodity prices leads to spiking risk premia, widening of external imbalances and fiscal pressures, capital outflows, sudden stops, and debt and financial crises across EMDEs. - Policy response: Allow automatic stabilizers to work within the current medium-term fiscal framework and provisions in the FRL. Continue data-dependent monetary policy tunning and limit FX intervention to reduce volatility under disorderly market conditions. - De-anchoring of inflation expectations and stagflation. (↓) - Likelihood: Medium - Impact if realized: Medium. Financing difficulties for government, firms/households, erode banks’ capital. - Description: Supply shocks to food and energy prices sharply increase headline inflation and pass through to core inflation, de-anchoring inflation expectations and triggering a wage-price spiral in tight labor markets. Central banks tighten monetary policy more than envisaged leading to weaker global demand, currency depreciations in EMDEs, and sovereign defaults. Together, this could lead to the onset of stagflation. - Policy response: Continue data-dependent monetary policy tunning to anchor domestic inflation expectations and secure convergence to the target band. Limit FX intervention to reduce volatility under disorderly market conditions. Intensify surveillance of financial institutions. - Local Covid-19 outbreaks. (↓) - Likelihood: Medium - Impact if realized: Medium. Weaker growth and lower fiscal expenses. - Description: Outbreaks in slow-to-vaccinate countries or emergence of more contagious vaccine-resistant variants force new lockdowns or inhibit commerce, resulting in extended supply chain disruptions, slower growth, capital outflows, and debt distress in some EMDEs. - Policy response: Respond with temporary and targeted fiscal support within the current medium-term fiscal framework and provisions in the FRL to preserve fiscal sustainability. ### Risk Assessment Matrix — Structural/Domestic Risks - Natural disasters related to climate change. (↓) - Likelihood: Medium - Impact if realized: High. Severe damage to infrastructure and agriculture. - Description: More frequent natural disasters deal severe damage to infrastructure (especially in smaller vulnerable economies) and amplify supply chain disruptions and inflationary pressures, causing water and food shortages and reducing medium-term growth. - Policy response: Strengthen the Disaster Risk Management framework, especially institutional arrangements for reconstruction efforts and the multilayered insurance scheme against climate change events. - Cyber-attacks. (↓) - Likelihood: Medium - Impact if realized: Low. Relatively low dependence on cybernetics. - Description: Cyber-attacks on critical physical or digital infrastructure (including digital currency platforms) trigger financial instability and disrupt economic activities. - Policy response: Upgrade risk management capacity and infrastructure (payments and settlement system); strengthen cyber security measures. ### Annex III. Building Resilience to Natural Disasters and Climate Change — Overview - Strategy: Jamaica is implementing a multipronged strategy to address climate risks by reducing vulnerabilities in physical infrastructure, the financial system, and the fiscal and external positions to the effects of climate change. The strategy includes both adaptation and mitigation measures. A. Jamaica’s Exposure to Climate Change Risks - Jamaica ranks 47th out of 191 countries in the 2023 Inform Risk index. - Under a business-as-usual (BAU) global emission scenario (RCP 4.5), Jamaica is projected to face a 1.54°C increase of mean temperature by 2100 relative to the 1986–2005 baseline. - Expected consequences: increased frequency of prolonged high heat and drought; tropical storm frequency expected to remain steady while intensity will increase with extreme rainfalls, high wind speed, flooding, and increased damages; rising sea level threatening coastal infrastructure and population. - ND-GAIN Vulnerability Index (2020): climate change and natural disasters in Jamaica affect the coastal, energy and transport infrastructure, as well as urban areas (buildings, water supply and sanitation, etc.). - Historical disaster damages: - Hurricanes Ivan (2004) and Dean (2007) caused damages of US$580 million and US$329 million each (or 8 and 3 percent of GDP, respectively). - In 2010, tropical storm Nicole caused damages of US$239 million (or 2 percent of GDP). - For a one in 100 years type of event, the fiscal losses are expected to exceed US$ 1,729 million (roughly about 10 percent of GDP); there is one percent probability in any year that losses will exceed US$ 1,729 million from such an event. - Tourism exposure: - Tourism-related BOP inflows are equivalent to some 20 percent of GDP. - Frequent, severe, and persistent natural disasters would likely sharply reduce tourist arrivals, devalue the capital base of the industry, disrupt foreign exchange inflows, and trigger unplanned fiscal expenditures. - Energy and emissions: - In 2020, Jamaica contributed to less than 0.03 percent of total GHG emissions. - In FY 2021/22, fuel commodity imports represented 11 percent of GDP and were twice the level of Jamaica’s goods exports. - Over 85 percent of Jamaica’s electricity production is derived from fossil fuel mostly heavy fuel oil. - High fuel import bill and related inflationary pressures following the war in Ukraine highlight the need to expeditiously transition to renewable energy. B. Jamaica’s National Climate Change Strategy - Strategy elements and milestones: - Vision 2030 Jamaica–National Development Plan defines long-term strategic development goals towards inclusive and sustainable growth. - Climate Change Policy Framework for Jamaica promulgated in 2015 and updated in 2021 (the 2021 Climate Change Policy has not yet been approved). - Jamaica submitted its Intended Nationally Determined Contribution (NDC) in November 2016 and ratified the Paris Agreement in April 2017. - In 2019, the government adopted the Integrated Resource Plan (IRP) — a road map for transitioning to renewable energy over a 20-year period. - In June 2020, Jamaica submitted an updated and more ambitious NDC. - In August 2021, Jamaica launched its NDC Implementation Plan; the Climate Change Division (CCD) in the Ministry of Economic Growth and Job Creation (MEGJC) will provide an update on commitments based on the NDC implementation plan. The next NDC implementation status is expected in FY2024. - Adaptation and disaster financing: - Jamaica is developing its first National Adaptation Plan (NAP) comprising a comprehensive adaptation implementation roadmap and investment plan. - Authorities are developing a National Disaster Risk Financing Policy that provides a menu of financing options the Government can draw upon to respond readily to natural disasters. C. NDC Targets and Expected Emissions Reductions - The updated NDC targets emissions reductions of between 25.4 percent and 28.5 percent (with external assistance) relative to business-as-usual by 2030. - About 80 percent of the reductions are expected to come from the energy sector through a large-scale ramp of renewables in the power sector as well as improved energy efficiency across all major energy consuming sectors. - The remainder will come from the land use change and forestry sector when measures such as the ‘No Net Loss of Forestry’ commitment and tree planting are completed. *Source: 1jamea2023001 - Annex I. Progress on 2021 Article IV Policy Recommendations* ### 8. Implementation to Date. Jamaica has made progress in addressing natural disasters and ### 8. Implementation to Date. Jamaica has made progress in addressing natural disasters and ### Institutional framework and disaster management - The 2015 Disaster Risk Management (DRM) Act establishes the National Disaster Risks Management Council, chaired by the Prime Minister, as the overseeing body. - The Office of Disaster Preparedness and Emergency Management (ODPEM), located in the Ministry of Local Government and Development, is the executive arm coordinating development and implementation of integrated disaster preparedness and management systems. - The DRM Act establishes the National Disaster Fund—managed by the ODPEM—to be used for upgrading and maintenance of resilient infrastructure, as well as provincial-level lower impact disasters. - A Comprehensive Disaster Management program (CDM), directed by the ODPEM, comprises preparation and execution of: - activities to minimize damage and amplify relief response; - recovery and rehabilitation plans; and - a mitigation phase when structural and non-structural measures are undertaken to limit the adverse impact of natural disasters, environmental degradation, and technological hazards. - The social safety net is fairly developed and allows for a quick response to humanitarian needs after a natural disaster; during COVID, Jamaica demonstrated sound procedures and relatively efficient institutions in providing support for the population. ### Public Financial Management (PFM) and disaster risk financing policy - In November 2018, Jamaica’s Cabinet approved a Public Financial Management (PFM) policy framework for natural disaster risk financing to: - bolster financial resilience by developing sound legal and institutional arrangements for mounting a swift and cost-effective financial response to natural disasters; - minimize budget reallocations and protect the fiscal balance; and - identify, monitor, and mitigate contingent liabilities associated with Public Private Partnerships (PPP) and fiscal risks due to natural disasters. - The MOFPS issued post-disaster budget execution guidelines in 2019 specifying instruments, disbursement modalities, and financial procedures consistent with disaster-related legislation and the Financial Administration and Audit Act; these guidelines are a key aspect of the PFM Policy Framework for Natural Disaster Risk Financing. - The MOFPS plans to adopt climate budget tagging with the support of the IDB. ### Comprehensive financing framework and instruments - The financing framework combines budget instruments, disaster risk insurance, and contingent lines of credit from IFIs: - Contingencies Fund: established under the Constitution and operationalized in Section 13 of the Fiscal Administration and Audit Act (FAA) to provide for unforeseen expenditure of any kind, including disasters. The aggregate ceiling of the Contingencies Fund was raised from J$100 million (US$652 thousand) to J$10 billion in 2019 (US$ 65.12 million). - National Disaster Fund (NDF): established under Part IX of the DRM Act for projects that mitigate, prevent, prepare for, respond to, and recover from emergencies and disasters and to provide financial assistance to households. The NDF is currently capitalized at US$ 2.2 million and has historically received an annual injection of around J$500 million (US$3.2 million). Authorities are considering shifting the focus of the NDF to local events and emphasizing ex-ante use of the Fund. - Caribbean Catastrophic Risk Insurance Facility (CCRIF): offers quick-disbursing, parameter-based insurance cover. Annual CCRIF insurance premia of around US$16mn/year are mostly financed through development partners, with GOJ contributing a small but increasing share. In 2021, insured hazards were earthquakes, tropical cyclones, and floods, with coverage up to US$ 248.7million. - Catastrophe bond (CAT bond): Jamaica sponsored a CAT bond placed in July 2021 securing US$185 million of disaster insurance protection from capital markets. - Rapid credit facilities: liquidity needs have been met historically through IFIs, including by relying on the IDB (US$ 285 million remain available) and the IMF’s Rapid Financing Instrument. ### Transparency, accountability, and public investment management - Disaster-related expenditures can be tracked through the budget program—disaster management—though usage is not uniform across government agencies. - The PIAB in the MOFPS developed templates requiring screening of climate hazards at project concept stage using the Caribbean Climate Online Risk & Adaptation Tool (CCORAL). - Plans to adopt a methodology for inclusion of climate impact assessments at pre-appraisal (concept) and appraisal (proposal) stages for infrastructure projects identified as medium or high risk, to improve prioritization and allocation of fiscal resources. - A Climate Public Investment Management Assessment (C-PIMA) is ongoing to further assess reforms’ progress and feasibility of priority measures. ### Green and resilient public investments, building standards, and coastal measures - Sectoral plans and strategies are aligned with the objectives and priorities of the NDC; Vision 2030 Jamaica is the overarching framework for sustainable development and climate change. - The 2018 Building Act and the National Building Code (adopted in 2018, in operation January 2019) incorporate the International Building Code (IBC) together with 11 documents describing standards of specification. The IBC provides for construction materials and practices that resist extreme weather events and addresses energy efficiency improvements in public buildings. - Many settlements remain outside the formal planning system and likely do not meet building standards. - The government initiated a Green Coastal Urban Renewal plan focusing on waterfront renewal, coastal revetments and sea walls, and relocation of vulnerable communities. ### Priority measures going forward (macrofiscal resilience and DRM financing) - Integrate climate risks into fiscal planning: MOFPS plans to introduce quantitative assessments of disaster risks in the fiscal policy paper by assessing long-term fiscal sustainability under different climate change scenarios. - Add climate change requirements into the PPP legal framework: work with IADB and World Bank to amend policy and regulatory frameworks to include climate requirements in PPP project agreements, and include comprehensive insurance policies to distribute contingent liabilities related to natural disasters among PPP partners. - Adopt the National Natural Disaster Risk Financing (DRF) Policy: ongoing work with World Bank assistance to inform selection of the most cost-effective ex-ante financing mechanisms; current diversity of tools appears more opportunity-driven than based on robust assessment of explicit and implicit contingent liabilities. - Establish and operationalize a National Natural Disaster Reserve Fund (NDRF): to be constituted under the consolidated fund for relief financing in catastrophic national level events and be eligible for external financing. - Integrate climate considerations in appraisal and selection of public investments: PIAB templates require CCORAL screening at concept stage; plans to include climate impact assessments at pre-appraisal and appraisal stages for medium/high risk infrastructure projects. ### Implementation to Date — Mitigation and renewables - LED street lighting: replacement reached 80 percent of streetlights in 2021; upfront costs of some US$30 million, with US$25 million funding and TA from the Caribbean Development Bank. Initiative to be extended to underlit areas and incorporated into a smart city roadmap. - Low-carbon public buses (2020-2025): 20 buses deployed as of 2021 in Montego Bay and St. James Parish; by 2025, 136 buses are to be in service. The project requires US$30 million financing yet to be secured plus financing for supportive infrastructure; supported by IDB TA. - National Tree Planting: about ½ million seedlings were planted by end-2021. The US$2 million project is advancing with pledges to plant another ¾ million seedlings; further private sector and/or international support is needed. - Externally funded energy projects: - Energy Efficiency & Conservation Program (EECP): supported retrofitting of many government facilities; concluded in 2018. - Energy Management and Efficiency Programme in Jamaica (EMEP): promotes energy efficiency and conservation; EMEP Urban Traffic Management System launched May 2021 to ease urban mobility and raise fuel efficiency in Kingston Metropolitan Area, Spanish Town, and Portmore, expected to decrease demand for gasoline and lower oil imports. - Funding for EMEP is secured through energy loans: IDB (US$15 million), Japan International Cooperation Agency (US$15 million), and the European Union Caribbean Investment Facility (US$ 10 million tbd). Energy Efficiency allocation is US$22.8 million, and Urban Traffic has US$3.43 million. ### Priorities going forward — renewables, electric mobility, and energy efficiency - Incentives for investment in renewables: develop legislation to incentivize renewable investment through fiscal measures like feebates or direct support. - Electric vehicles: Cabinet approved the Strategic framework for electric mobility; authorities intend to develop an electric vehicle policy setting standards, energy sector guidelines, operational codes, and guidelines for an electric mobility ecosystem. - Energy efficiency measures: policies to reduce theft of streetlights, replace existing lightbulbs in schools and hospitals with low energy alternatives, secure inventory of energy-efficient lightbulbs; introduce reporting, monitoring, and evaluation procedures; consider incentives to replace air-conditioning with heat exchange units such as heat-pumps and other green technologies. ### Greening the financial sector - In 2022 the Central Bank of Jamaica (BOJ) joined the International Sustainable Banking and Finance Network (SBFN) to develop capacity to monitor climate change risks in line with best practices. - The BOJ has been engaged by the Basel Consultative Group to participate in its proportionality workstream to expedite adoption of supervision of climate adaptation risks and related areas. - The BOJ is a member of the Association of Supervisors of Banks of the Americas and will consider becoming a member of the Network for Greening the Financial System (NGFS). - The Financial Stability Commission (FSC), at end-2021, adopted a risk-based supervision framework that recognizes the importance of accounting for climate-related risks and expects licensees and registrants to adopt the Financial Stability Board’s TCFD recommendations where relevant (governance, strategy, risk management, metrics and targets related to climate risk issues). *International Monetary Fund — Jamaica: Implementation to Date (section 8, content unit 1jamea2023001).* ### 13. Priorities Going Forward. The authorities plan to develop green financial instruments and ### 13. Priorities Going Forward ### Strengthening financial-sector resilience to climate risks - The authorities plan to develop green financial instruments and the capacity for management of climate-related risks to enhance financial sector resilience and help scale up climate financing. - Critical elements in this process will involve: - (i) allocation of adequate resources and the building of internal capacity for supervision of climate risks; - (ii) setting expectations (guidelines) for financial institutions on governance and strategy, risk management, scenario analysis and stress testing, and disclosure of climate-risks; and - (iii) improvements in data collection from financial institutions to better monitor their exposure to climate-related risks. ### Green bonds - The authorities intend to develop a green bond market to mobilize private sector financing for climate adaptation and emission reduction projects—these bonds would also signal commitment to address the impact of climate change and may catalyze other financing. - Issuance timing considerations: - The authorities will assess the convenience of issuance at an early stage in the adoption of reforms or when the conceptualization reaches its mature stage—an early issuance might be helpful if it locks in private sector interest in the projects and stresses the authorities’ own commitment to them. ### BOJ–AFD project to green the Jamaican financial system: scope and phases - Partnership: Bank of Jamaica (BOJ) has partnered with the Agence Française de Développement (AFD) to green the Jamaican Financial System. The project comprises two phases, with funding provided by the AFD (phase 1) and the European Union Caribbean Investment Fund (CIF) (phase 2). - Phase 1 (focus and outputs): - Focus: building capacity at the BOJ and the FSC to incorporate Climate-Related Financial Risks (CRFR) into their risk-based supervision, risk monitoring, and evaluation practices. - Activities: - The BOJ will engage a consultant to assess the climate-related financial risks. - The consultant’s report will outline the national policies/regulatory framework and provide a diagnostic of climate risk considerations in the Jamaican financial system. - Adoption of a monitoring framework, including identification of key risks and related monitorable indicators. - Development of detailed guidance on the data required to measure exposures and conduct stress tests. - Completion of a report outlining recommendations for implementation of climate stress testing, and the governance and regulatory regime in the Jamaican financial system. - Phase 2 (focus and timeline): - Focus: integration of climate risks in supervision and macroprudential policy formulation. - Timeline: expected to continue over the next four years. - Activities: - Conducting climate related stress tests. - Developing a monitoring framework to manage risks. - Building capacity at the BOJ and the FSC for on-going assessment of climate-related risks. ### Relevant climate mitigation measures and funding needs (NDC, selected items) - Selected measures from Jamaica’s NDC (2020–30) at a glance (Measure — Year Start — Year End — Share of 2030 (In percent) — Funding Need USD mln — Secured — Source — Gender Impact — Progress): - 1. By 2030, deploy 484MW of power from renewable sources (IRP) — 2019 — 2030 — 21 — 664.86 — Partial — Power Producers — Neutral — Ongoing - 2. Allow self-generators selling to the grid (Net billing Facility) — 2013 — 2020 — 0.5 — 0.12 — Partial — Self-financed — Neutral — Ongoing, COVID delay - 3. Reduction in Transmission & Distribution losses — 2013 — 2020 — 8.9 — 64.7 — Partial — Various — Neutral — Ongoing, COVID delay - 4. Installation of LED Street Lighting — 2017 — 2021 — 1 — 15 — Funded — Various — Positive — Ongoing, COVID delay - 5. Switch to fluorescent lights in schools & hospitals — 2020 — 2030 — 0.1 — 0.1 — Unclear — Domestic — Positive — Unclear, COVID delay - 6. Deploy low-carbon busses — 2020 — 2025 — 0.2 — 30.05 — Unclear — Various — Positive — Ongoing - 7. Biodiesel blending (B5) — 2020 — TBD — 1.4 — 148.4 annually — Unclear — Domestic — Neutral — Yet to start, COVID delay - 8. Improved use of heat & power in alumina refining — 2020 — 2030 — 30 — 1.96 — Partial — Domestic — Neutral — Ongoing - 9. Use LNG @ Alpart refinery — 2019 — TBD — 13 — TBD — Unclear — Domestic — Neutral — Yet to start, COVID delay - 10. Tree Planting 3 million — 2020 — 2022 — 2.2 — 2.16 — Funded — Various — Positive — Ongoing - 11. No net loss of forest cover — 2013 — 2030 — 13.2 — TBD — Unclear — Domestic — Neutral — Ongoing - 12. Reduce non-revenue water losses in Kingston — 2015 — 2021 — 0.6 — 45 — Partial — Various — Neutral — Ongoing - 13. Energy Efficiency & Conservation — 2012 — 2018 — 0.2 — 20 — Funded — Various — Neutral — Concluded - 14. Energy Efficiency in Public Buildings — 2017 — 2023 — 0.4 — 22.8 — Partial — Various — Neutral — Ongoing - 15. Energy Efficiency Urban Traffic System — 2017 — 2023 — 6.4 — 3.43 — Partial — Various — Neutral — Ongoing - 16. Reduce electricity consumption in water sector — 2020 — 2030 — 1 — 34.97 — Partial — Various — Neutral — Ongoing - Source noted in table: World Bank, Jamaica’s NDC Implementation Plan, Washington DC, August 2021. *Source: 13. Priorities Going Forward — Jamaica IMF report (content unit 1jamea2023001).* ### 6. The medium-term risk analysis is low consistent with mechanical signals. ### 6. The medium-term risk analysis is low consistent with mechanical signals. ### Medium-term solvency: Fan chart - Fan chart (Debt fan chart index) score: 1.5 (moderate). - Baseline debt trajectory and the fan are on a downward trend. - Probability of debt not stabilizing: assessed to be limited. - Overall assessment: solvency risks should be contained with continuous fiscal consolidation and a gradual economic recovery. - Vulnerabilities noted: re-emergence of COVID-19, natural disasters, and a global economic downturn. ### Medium-term liquidity: Gross Financing Needs (GFN) - GFN finance ability index score: 6.4 (below the low-risk threshold of 7.6) — indicates a low risk. - Medium-term GFN is expected to gradually come down as fiscal consolidation progresses. - Roll-over risks: limited in the medium-term due to authorities extending maturity of existing debt through issuance of 2045 bonds. ### Long-term risk analyses - Overall long-term risk assessment: moderate. - Large amortization module results: gradual declines in GFN and debt relative to GDP under both baseline and customized scenarios. - Climate-related expenditure: manageable; would not significantly impact debt sustainability in the long run even under the customized scenario where an additional 0.5 percent of GDP expenditure is added in the baseline (preliminarily estimated to address both adaptation and mitigation investment needs). - Health care expenditure: current policies would not pose significant sustainability concerns. - Pension expenditures: under the current system would lead to larger GFNs and an upwards debt trajectory in the long run; indicates need to undertake parametric reforms of the current public pension system. ### Debt sustainability and risk of sovereign stress - Jamaica’s public debt: assessed to be sustainable with a high probability. - Projected debt trajectory: remains vulnerable to uncertainty from the size and duration of global shocks and associated risks to growth, interest rates, exchange rate and fiscal revenues. - Mitigating factors: strong policy track record, authorities’ commitment to meet the medium-term debt target sooner should growth overperform, and prudent debt management. - Fiscal Responsibility Law debt target: 60% of GDP by 2027. - Fiscal Outlook: after the Covid-19 shock, the economy is recovering and debt is on a declining trend and is expected to decline to 60 percent of GDP by FY2027/28, as stipulated under the FRL. - Overall risk of sovereign stress: moderate — reflecting a low to moderate level of vulnerability in the near-term and long-term, and a low level of vulnerability in the medium-term. - Final sustainability qualifier: Sustainable with high probability. *Source: Fund staff.* ### 5. Debt consolidation across sectors: ### 5. Debt consolidation across sectors: ### Coverage and public debt data - DSA coverage: debt issued by central government, public bodies and debt guaranteed by central government. - Authorities are improving coverage and quality of public debt data, including expanding the coverage to general government. - Perimeter shown in figures: central government. ### Public debt structure and projections (indicators and commentary) - Commentary highlights: - Share of external debt is expected to decline over the medium-term as authorities implement strategies to develop the domestic debt market. - Local currency debt is projected to decline with projected fiscal surpluses over medium-term and use of government deposits to pay down domestic debt. - Strong declining share of “domestic other creditors” in total public debt. - Liability management operations and buybacks of global bonds have reduced the stock of foreign currency debt. - Most planned issuances are for medium to long-term maturity. - Residual maturity: 6. years (as shown). ### Baseline scenario — key projections and contributors (Table 3) - Public debt (Percent of GDP): - Actual 2021: 94.28 - 2022: 84.17 - 2023: 77.97 - 2024: 74.07 - 2025: 70.06 - 2026: 64.45 - 2027: 59.95 - 2028: 56.45 - 2029: 53.84 - 2030: 49.94 - 2031: 47.54 - 2032: 47.3 - Change in public debt (percent of GDP): -15.5, -10.1, -6.2, -3.9, -4.0, -5.6, -4.4, -3.5, -2.7, -3.9, -2.4, -0.2 (2021–2032). - Contribution of identified flows (percent of GDP): -15.9, -8.0, -5.6, -3.9, -4.6, -4.7, -4.6, -3.7, -2.6, -3.1, -2.1, -2.7 (2021–2032). - Primary deficit (percent of GDP): -6.8, -5.8, -5.4, -5.2, -5.6, -5.7, -5.4, -3.3, -3.2, -3.1, -2.9, -2.8 (2021–2032). - Noninterest revenues (percent of GDP): 31.0, 29.4, 29.4, 29.4, 29.5, 29.7, 29.9, 30.0, 30.0, 30.1, 30.3, 30.4 (2021–2032). - Noninterest expenditures (percent of GDP): 24.2, 23.6, 24.0, 24.2, 23.9, 23.9, 24.5, 26.7, 26.8, 27.1, 27.3, 27.5 (2021–2032). - Automatic debt dynamics (percent of GDP): -9.1, -2.2, -0.2, 1.2, 0.9, 1.0, 0.8, -0.3, 0.6, 0.0, 0.9, 0.2 (2021–2032). - Int. rate-growth differential: -12.9, -4.4, -0.6, 0.4, 0.1, 0.2, 0.0, 0.0, 0.0, 0.4, 0.4, 0.5 (2021–2032). - Real interest rate: -4.6, -1.2, 1.0, 1.8, 1.2, 1.1, 0.8, 0.7, 0.8, 1.1, 1.1, 1.1 (2021–2032). - Real growth rate: -8.3, -3.2, -1.6, -1.4, -1.1, -0.9, -0.8, -0.8, -0.7, -0.7, -0.6, -0.6 (2021–2032). - Contribution of residual (percent of GDP): 0.4, -2.5, -1.4, 0.0, 0.5, -0.9, 0.2, -0.9, -0.2, -1.9, -0.5, 1.6 (2021–2032). - Gross financing needs (GFN; percent of GDP): 4.9, 5.6, 6.4, 9.7, 3.5, 3.4, 3.6, 10.8, 9.1, 7.7, 4.8, 4.4 (2021–2032). - Of which: debt service (percent of GDP): 11.7, 11.4, 11.8, 14.9, 9.1, 9.1, 9.0, 14.2, 12.2, 10.7, 7.7, 7.2 (2021–2032). - Local currency (percent of GDP): 6.9, 6.5, 4.9, 9.1, 5.3, 4.1, 5.5, 9.9, 9.0, 6.2, 4.8, 5.0 (2021–2032). - Foreign currency (percent of GDP): 4.8, 4.8, 7.0, 5.8, 3.8, 5.0, 3.5, 4.3, 3.2, 4.5, 2.9, 2.2 (2021–2032). - Memo: - Real GDP growth (percent): 8.2, 3.5, 2.0, 1.8, 1.5, 1.3, 1.3, 1.3, 1.3, 1.3 (selected years). - Inflation (GDP deflator; percent): 10.1, 7.7, 5.2, 4.5, 5.0, 5.0, 5.0, 5.0, 5.0, 5.0, 5.0 (selected years). - Nominal GDP growth (percent): 19.2, 11.5, 7.3, 6.4, 6.6, 6.4, 6.4, 6.4, 6.4, 6.4, 6.4 (selected years). - Effective interest rate (percent): 5.1, 6.3, 6.5, 7.0, 6.8, 6.6, 6.3, 6.3, 6.4, 7.2, 7.3, 7.5 (selected years). - Staff commentary: - Public debt is expected to resume its downward path to meet the debt target of 60 percent of GDP by FY2027/28, in accordance with the Fiscal Responsibility Law. - Authorities have reduced near-term financing needs through liability management operations, buybacks and maturity extension (by issuing 2045 bonds). - Debt dynamics remain vulnerable to global shocks, natural disaster susceptibility, and realization of contingent liabilities from public bodies. - Large GFN needs in 2024, 2028 and 2029 as global bonds mature; intention to issue global bonds after 2025 when financial conditions improve. ### Realism of baseline assumptions (Figure 3) - Realism analysis finds no major concerns; past forecast errors do not reveal systematic biases. - Most debt reduction over next five years expected from improvements in primary balance under MTFF and FRL. - Statements on percentiles: - Planned debt reductions and fiscal adjustments are above the 79th percentile (chart). - Past Jamaica adjustments during 2013-19 were similar or bigger though above the 75th percentile distribution. - Key mechanisms reducing interest payments: - Declining debt, lower term spreads on external financing, better debt management expected to reduce real interest rate of public debt. - Growth projections: in line with historical averages. - Near-term high inflation impacts r - g differential, reflecting low real rates. ### Medium-term risk analysis (Figure 4) - Debt fanchart and GFN financeability indicators (selected values): - Fanchart width: 53.7 0.8 - Probability of debt not stabilizing (pct): 2.5 - Terminal debt level x institutions index: 31.6 0.7 - Average GFN in baseline: 5.4 1.8 - Bank claims on government (pct bank assets): 10.8 3.5 - Change in claims on govt. in stress (pct bank assets): 3.6 1.2 - GFN financeability index: 6.6 - Medium-term index (MTI) components shown; normalized levels and weights indicate low to moderate risk. - Commentary: Both the Debt Fanchart Module and the GFN Financeability Module suggest lower level of risk. - Probabilities: - Prob. of missed crisis, 2022-2027 (if stress not predicted): 9.1 pct. - Prob. of false alarm, 2022-2027 (if stress predicted): 48.9 pct. ### Long-term risk analysis (Figure 5) — amortization, pensions, health, climate - Large amortization module scenarios: - Baseline with t+5: overall fiscal balance maintained at 2.5% of GDP; debt falls rapidly and reaches zero by 2040 (per figure commentary). - Customized scenario: assumes lower overall balance averaging 1 percent of GDP over the long term (consistent with fiscal rule and allows higher spending for health, education, climate change); debt falls and GDP growth maintained at potential growth of 1.3 percent; used as baseline for long-term simulations. - Under customized scenario and FRL target attainment, authorities maintain overall fiscal balance of 1% of GDP; debt projected to fall to 47 percent of GDP by 2040. - Standardized adaptation module: adds adaptation investment costs of 0.3 percent of GDP in the medium term and declining thereafter (interpreted as adverse scenario of unexpected additional net costs). - Standardized mitigation module: adds mitigation costs averaging about 0.3 percent of GDP over the projection period (expected to be frontloaded). - Commentary: combination of additional mitigation and adaptation costs do not pose a large risk to debt trajectory in scenarios presented. - Pensions module: - FY 2022/23 pension contributions were 1% of GDP while pension benefits were 1.5% of GDP. - Combined reserves worth 10 percent of GDP. - Modelled demographic pressures run down assets within about 10 years, generating fiscal pressures and important risks to debt. - Health module: - Scenario of higher spending per capita by 0.5 percent per year suggests fiscal pressures that would prevent sustained declines in debt or financing needs. ### External Debt Sustainability Framework (Table 4 and stress tests) - Baseline external debt (percent of GDP): - 2017: 90.4 - 2018: 85.7 - 2019: 82.6 - 2020: 103.9 - 2021: 92.6 - 2022: 82.7 - 2023: 77.6 - 2024: 74.7 - 2025: 70.9 - 2026: 67.5 - 2027: 64.2 - Debt-stabilizing non-interest current account: -4.0 (as shown). - Change in external debt (percent of GDP): -7.2, -4.7, -3.1, 21.3, -11.3, -9.9, -5.1, -2.9, -3.8, -3.4, -3.3 (2017–2027). - Identified external debt-creating flows (percent of GDP): -12.2, -6.3, -0.2, 10.7, -11.9, -2.9, -1.6, -2.1, -3.0, -2.9, -2.8 (2017–2027). - Current account deficit, excluding interest payments (percent of GDP): 0.2, -0.9, -0.9, -1.2, -1.3, 0.2, 0.4, 0.2, -0.2, -0.2, -0.2 (2017–2027). - Exports (percent of GDP): 33.7, 38.0, 37.0, 20.1, 32.1, 38.0, 37.8, 37.9, 38.0, 38.0, 38.0 (2017–2027). - Imports (percent of GDP): -49.5, -51.7, -51.1, -41.7, -53.6, -58.0, -55.0, -54.1, -53.5, -53.2, -53.0 (2017–2027). - Net non-debt creating capital inflows (negative; percent of GDP): -9.1, -4.2, -2.1, -3.2, -2.5, -2.5, -2.9, -3.3, -3.8, -3.8, -3.8 (2017–2027). - Automatic debt dynamics (percent of GDP): -3.2, -1.3, 2.8, 15.1, -8.1, -0.6, 0.9, 1.0, 1.0, 1.1, 1.1 (2017–2027). - Contribution from nominal interest rate (percent): 2.9, 2.5, 2.6, 2.3, 2.4, 2.3, 2.4, 2.3, 2.3, 2.2, 2.2 (2017–2027). - Contribution from real GDP growth (percent): -0.9, -1.7, 0.1, 10.5, -7.6, -2.9, -1.5, -1.3, -1.2, -1.1, -1.0 (2017–2027). - Contribution from price and exchange rate changes (percent): -5.2, -2.1, 0.1, 2.3, -3.0, .............. (table shows omitted entries). - External debt-to-exports ratio (percent): 268.5, 225.8, 223.3, 517.5, 288.4, 217.6, 205.1, 197.1, 186.4, 177.4, 168.9 (2017–2027). - Gross external financing need (in billions of US dollars; selected): 3220.3, 3153.1, 2369.6, 2061.4, 2852.7, 2944.8, 3369.9, 3356.4, 3158.1, 3176.5, 3147.4 (2017–2027) — table entries appear with formatting reflecting billions values. - Gross external financing need (percent of GDP): 21.4, 20.0, 15.1, 15.2, 18.9, 10-Year 10-Year 17.5 18.7 17.9 16.2 15.7 15.0 (table shows multi-column formatting). - Key macro assumptions (selected): - Real GDP growth (percent): 0.9, 1.9, -0.1, -11.0, 8.2, 0.3, 4.7, 3.5, 2.0, 1.8, 1.7, 1.6, 1.6 (historical and projection mix shown). - GDP deflator in US dollars (change in percent): 5.7, 2.4, -0.2, -2.7, 2.9, 0.2, 3.2, 7.3, 4.9, 2.5, 2.4, 2.0, 2.0 (selected years). - Nominal external interest rate (percent): 3.2, 2.9, 3.0, 2.5, 2.6, 3.8, 1.4, 2.7, 3.2, 3.1, 3.2, 3.2, 3.3 (historical and projection mix). - Growth of exports (US dollar terms, percent): 12.9, 17.7, -2.8, -53.0, 78.2, 5.9, 31.9, 31.4, 6.4, 4.6, 4.5, 3.7, 3.6 (selected entries). - Growth of imports (US dollar terms, percent): 15.3, 9.0, -1.4, -29.3, 43.0, 1.8, 18.8, 20.2, 1.4, 2.8, 2.8, 3.2, 3.2 (selected entries). - Current account balance, excluding interest payments (percent of GDP): -0.2, 0.9, 0.9, 1.2, 1.3, -0.5, 2.9, -0.2, -0.4, -0.2, 0.2, 0.2, 0.2. - Net non-debt creating capital inflows (percent of GDP): 9.1, 4.2, 2.1, 3.2, 2.5, 4.4, 2.2, 2.5, 2.9, 3.3, 3.8, 3.8, 3.8. - Stress test notes and bound tests (Figure 6): - Interest-rate shock examples show baseline and shock paths (e.g., baseline 64, shock 67 in one chart). - Scenarios include i-rate shock, interest rate shock, CA shock, combined shock, real depreciation shock (30 percent depreciation in 2023), growth shock. - Boxes indicate average projections for baseline and scenarios; permanent one-half standard deviation shocks applied; historical averages shown for ten-year baselines. - Selected scenario values (examples in figure boxes): Baseline: 64; Historical: 81 (one panel); Combined shock: 73; Real depreciation shock: 99 (one panel): Growth shock panel shows Baseline: 64, Scenario: 72, Historical: 81 in various panels. *Source: 1jamea2023001 - 5. Debt consolidation across sectors (IMF chapter content).* ### Annex VI. Capacity Development Strategy ### Annex VI. Capacity Development Strategy ### Context and recent engagement - Jamaica graduated from 6½ years of Fund-supported programs in November 2019; Fund CD was extensive over this period and supported program objectives. - Achievements during the program period included: - Improvements in revenue administration and tax policy that contributed to a steady increase in the tax-to-GDP ratio. - Enhanced cash and financial management and improved treasury operations. - Passage of a revised Bank of Jamaica Act and approval of legislation for an independent Fiscal Council. - Customized training including on Forecasting and Policy Analysis System (FPAS) and Financial Programming and Policies (FPP). - CD missions occurred since January 2018 with tentatively planned missions for 2021/22, indicating continued heavy use of CD going forward. ### Collaboration and integration of CD - The IMF team will remain the main channel of engagement on CD, in close coordination with CARTAC and CD providers at headquarters. - CD delivery has been aligned with authorities’ reform objectives and will continue to be guided by surveillance and program priorities, including joint missions and coordinated sequencing of CD across reform streams. - Collaboration with other partners remains strong, notably with the World Bank on the National Risk Assessment (NRA) and with the IDB on governance issues, and coordination with partners on disaster risk financing and social protection. ### CD Priorities — Strategic reform areas - Authorities’ priority actions at the conclusion of the Stand-by Arrangement in November 2019 included: - Establishing a Fiscal Council. - Placing price stability at the core of BOJ legislation and operations. - Strengthening macro-fiscal analytical and forecasting capacity. - Maintaining a stable financial sector with improved risk-based supervision. - Adopting a natural disaster financing strategy. - Improving the effectiveness of the AML/CFT regime (heightened priority following FATF placement in June 2020). - AML/CFT (LEG: Financial Integrity) - Jamaica was placed by FATF on the list of countries under increasing monitoring in February 2020. - Progress: passage of a revised Proceeds of Crime Act and Terrorism Prevention Act; publication of the National Risk Assessment (NRA) in August 2021. - Remaining gaps include: - Bringing all financial institutions and non-financial institutions under the AML/CFT regime. - Ensuring adequate risk-based supervision of banks and non-banks. - Ensuring accurate and up to date beneficial ownership information is available on a timely basis. - Increasing the use of financial intelligence and money laundering investigations and prosecutions. - Planned CD: continue to support development of AML/CFT supervision for banks and non-banks (Cambios and microfinance sector); continue review of legal and regulatory framework addressing preventive and supervisory AML/CFT regime. World Bank and IDB have assisted with the NRA and other AML issues. - Fiscal institutions and revenue administration (FAD; ICD) - Maintain fiscal discipline and achieve the debt target under the fiscal rule; strong fiscal institutions and analytical capacity are required. - FAD: Public Financial Management - CD prioritized supporting the operationalization of the Fiscal Council; legislation was approved in 2021 and authorities are working on the composition of the council to make it operational. - FAD: Revenue Administration - Recent FAD TADAT TA assisting with improving compliance, tracking taxpayers, and prioritizing timeliness in filing rates and accuracy in reporting tax arrears. - ICD: Macro-Fiscal Frameworks - Support to MOFPS and PIOJ to strengthen macro-fiscal management through customized on-line and face-to-face FPP and Fiscal Sustainability (FS) courses, and implementation of a Debt Dynamics Tool to inform debt management. - Planned development of an Excel-based framework to allow MOFPS and PIOJ to produce comprehensive macroeconomic forecasts, strengthen policy analysis, and enrich projection discussions with STATIN and BOJ. - Monetary, FX frameworks and financial sector oversight (MCM; STA) - With the revised BOJ Act approved, modernization and data quality improvements are critical for BOJ to deliver price stability. - MCM: Central bank operations and Monetary and Macroprudential Policy - CD to support operationalization of the new monetary policy committee (based on best practices from other inflation-targeting central banks). - Assistance on policies to manage capital flows, develop tools for consolidated supervision, and analyze and control cyber and fintech risks including in the context of adoption in late 2022 of the CBDC by the BOJ. - STA: Real sector - Support production of high-quality and timely data essential for policy analysis. - Current data issues: Supply and use tables (SUT) are significantly out of date; expenditure-based GDP estimates are only produced on an annual basis with significant lag. - CPI expenditure weights updated with the 2017 Household Expenditure Survey and published with the index series starting in January 2020. - Plans to improve scope of the PPI to cover industries like electricity, gas, services, among others. ### Other reform areas - Areas that have received CD support and will require less extensive support going forward include: - Developing a tax administration reform strategy. - Strengthening international and natural resource taxation regimes. - Data dissemination deficiencies, including timeliness, mean additional Fund support would be needed to improve statistical capacity at STATIN and MOFPS to meet SDDS subscription requirements. ### Challenges, delays, and mitigation options - CD engagement declined during the pandemic but authorities have started to reengage; CD priorities remain unchanged and are critical to support recovery and medium-term objectives. - Capacity constraints and operational challenges: - High staff turnover and understaffing at MOFPS and STATIN pose risks to reform progress. - The macro-fiscal analysis reform area experienced frequent delays even before COVID-19 due to lack of resources and prioritization at the working level; delays compounded by high staff turnover and integration delays of macroeconomic analysis units at PIOJ and MOFPS. - Financial sector supervision priorities and Fund support: - Staff supports BOJ efforts towards implementation of the Basel II/III framework and risk-based supervision, enhanced supervisory oversight of Domestically-Systemically Important Banks (DSIBs), and stronger oversight of financial conglomerates and insurance groups. - Improving effectiveness of the AML/CFT regime remains a key reform priority following Jamaica’s placement on the list of countries under increased monitoring. ### Integration matrix highlights (as of August 2022) - AML/CFT Supervisory Regulatory Framework - Objective: Make operational and legislative changes in line with FATF recommendations; work towards addressing deficiencies in Jamaica’s Mutual Evaluation Report to exit the FATF intensified monitoring regime. - Engagement: LEG series of missions to develop and establish AML/CFT risk-based supervisory frameworks for deposit-taking institutions and cambios. - Achieved outcomes: Progress on key legal reforms addressing main deficiencies in the 2017 CFATF Mutual Evaluation Report (MER). - Expected future outcomes: Continue to address issues per FATF action plan, primarily by developing institutional capacity to implement and enforce risk-based supervision. - Macro-Fiscal Capacity Building - Objective: Strengthen macro/fiscal capacity through development of comprehensive framework to achieve debt target under fiscal rule. - Engagement: ICD (with WHD support) — Customized FPP and FS courses, webinar series on macroframework implementation, implementation of Debt Dynamics Tool (DDT). - Achieved outcomes: - Over 40 officers trained. - DSA in FY2020/21 budget informed by DDT results. - MOFPS to dedicate more resources to upgrade macro/fiscal analysis and IT systems. - Expected future outcomes: - Interim Fiscal Policy Paper to include preliminary results from enhanced macro framework. - Integrated macroframework and debt dynamics tools to inform fiscal policy decisions. - Revenue Administration - Engagements included FAD assessment of customs reforms, CARTAC support to improve customs procedures, STX review of legislative proposals for Customs Law, and FAD TADAT TA on revenue administration. - Achieved outcomes: - Customs Act entered Joint Select Committee review in Parliament. - Standard operating procedures and workload analysis developed for core customs functions. - Efficiency of post-clearance audits improved. - IT system enhanced. - Expected future outcomes: - Regulations for new Customs Act to be tabled in Parliament in September 2020. - Continued enhancements to revenue administration. *Annex VI. Capacity Development Strategy (1jamea2023001).* ### introduction of ### introduction of ### Maintaining Fiscal Discipline and Strengthening Institutions - Objectives: Achieve debt target under the fiscal rule supported by strong fiscal institutions and public bodies. - Public Financial Management - TA/Training Engagement: CARTAC/STX: Cash forecasting, and management. LTX: Analyzed government account balances held outside of the treasury account. Manuals for cash management and treasury developed. - Achieved Outcomes: - Report on account balances led to closure of accounts. - Enhancements to chart of accounts developed and adopted. - Basic cashflow forecasting capacity developed. - Improved bank account monitoring and closure of unused and unnecessary accounts. - Expected/Future Outcomes: - Improved management of government cash resources. - Increased capacity for better financial reporting. - Improved operations in the Accountant General Department. - Public Bodies’ Reforms - Objective: Strengthen fuel pricing mechanism. - TA/Training Engagement: FAD: Desk review of fuel pricing reform. - Achieved Outcomes: Report delivered outlining options for improving pricing mechanism. - Expected Outcomes: Simplification of pricing formula and enhanced transparency via publication. - Government Financial Statistics (GFS) - Objective: Report government financial statistics for the general government to meet SDDS standard. - TA/Training Engagement: STA: Guidance and training provided on producing general government statistics. - Achieved Outcomes: Systems and training in place to produce general government tables. - Expected Outcomes: - Inclusion of general government statistics in Fiscal Policy Paper. - Include appropriations in aid in budgetary central government statistics. - Public Debt Management - Objective: Enhance the primary dealer system and functioning of the debt market. - TA/Training Engagement: MCM: Identified areas of improvement in the primary dealer system. - Achieved Outcomes: Initialized a review of the Primary Dealer Agreement; improved coordination amongst main participants in PD system with MOFPS playing a more active coordinating role. ### Modernizing Monetary, Foreign Exchange, and Financial Frameworks - Central Bank Operations - Objective: Modernize organizational structure in line with BOJ Act and enhance modelling and forecasting techniques. - TA/Training Engagement: MCM: Series of hands-on on- and off-site TA missions on FPAS (subject to progress achieved by the authorities on the operational side and capacity building). - Achieved Outcomes: Trained [x] staff on the use of FPAS which now informs projections for monetary policy committee meetings. Revamped organizational structure in line with new Monetary Policy Committee functions. - Expected Outcomes: Continued use and customization of the FPAS model; enhanced communications structure and messaging (COM). - Bank and Financial Sector Supervision and Regulations - Objectives: Implementing Basel II and III Framework; improving supervisory oversight of financial conglomerates and other financial groups; improving Securities Market oversight. - TA/Training Engagement: CARTAC: Series of missions on implementing Basel II -III Framework and risk-based consolidated supervision. - Achieved/Expected Outcomes: - Banks have adequate capital and liquidity that is in line with the Basel II/III standards. - Amended legal/regulatory and supervisory frameworks underpinning risk-based consolidated supervision implemented. - Improved supervisory process (including risk assessment frameworks) for market intermediaries and collective investment scheme (CIS) operators. - Financial Stability - Objective: Preserving financial sector stability. - TA/Training Engagement: MCM/LEG: Design legislation for comprehensive Crisis Management and Special Resolution Regime Framework (subject to progress on earlier LEG/MCM recommendations). MCM/STX: Work on contagion effects and risks around financial groups. - Achieved/Expected Outcomes: Passing legislation and regulations for crisis management framework and special resolution regime; review and support drafting of cabinet submission and elements of legislation for the Resolution Authority. - Macroprudential Policy - Objective: Develop Jamaica specific menu of macroprudential tools along with requisite data and risk metric. - TA/Training Engagement: MCM: Upgrading macroprudential framework and designing capital flow safeguards and risk metric dashboards. - Expected Outcome: Planned macroprudential toolkit to be introduced. - Balance of Payments Statistics - Objective: Identifying data gaps contributing to larger errors and omissions in the Balance of Payments statistics and compilation of direct investment data. - TA/Training Engagement: STA: Improving FDI position data. - Achieved Outcomes: Authorities reporting BOP statistics on BPM6. - Expected Outcomes: Strengthen BOP/IIP source data. - Monetary and Financial Statistics - Objective: Strengthening compilation of depository corporations survey, expanding coverage of monetary statistics to include other financial corporations, and compiling financial soundness indicators. - TA/Training Engagement: STA: Guidance and training provided on producing monetary statistics including for other financial corporations using the Standardized Reporting Forms (SRFs) in line with the methodology of the Monetary and Financial Statistics Compilation Guide and Manual. - Achieved Outcomes: Authorities submitting data on central bank and other depository corporations survey using SRF. - Expected Outcomes: - Improve coverage of monetary statistics to include other financial corporations. - Production of a key set of Financial Soundness Indicators. - National Accounts - Objective: Update the supply use tables and produce quarterly expenditure-based estimate of GDP. - TA/Training Engagement: STA; STX/STATCAN: Review of updated supply and use tables. - Achieved Outcomes: Both updated SUT and quarterly estimates are nearly completed. - Expected Outcomes: Publication of the quarterly expenditure-based estimates; publication of 2017 SUT. - Price Statistics - Objective: Reweight Consumer and Producer Price Indices. - TA/Training Engagement: CARTAC: Provided feedback on preliminary CPI weights. - Achieved Outcomes: New and old baskets being used to produce CPI estimates in parallel. - Expected Outcomes: - Publish CPI and PPI using new weights. - Improve coverage of the CPI by including additional cities, and PPI with additional industries including gas, electricity and services. ### IMF Capacity Development Missions Since 2018 (selected highlights) - AML/CFT and Legal - Strengthening BOJ’s AML/CFT Supervisory Framework: LEG Nov 2017, Jan–Feb, 2018, Sep 2018, April 2019, December 2019. - Financial and Fiscal Law: LEG/CARTAC Feb 2018–Mar 2018. - Public Financial Management and Tax - Treasury Single Account, Review of Financial Management: LTX July 2017 to December 2018. - Macro-Fiscal Capacity Development: STX January 2018. - Develop a Cash Management Manual: STX November 2018; Finalization of Treasury Manual: STX Feb 2021, Mar 2021. - TADAT on Tax Administration: FAD/TADAT July 2022. - Debt Market and Financial Sector - Developing the Debt Market and Reforming the Primary Dealer System: MCM Dec 2–6, 2019. - Implementing Basel II-III Capital Framework: CARTAC July 2018; Implement Pillars 1 and 2 of Basel II/III: CARTAC Jan 2021, Apr 2021. - Bank of Jamaica Modeling and Forecasting: Strengthening Modeling and Forecasting at BOJ MCM/STX Mar 5–16, 2018; multiple follow-ups through Dec 4, 2019. - Statistics and National Accounts - CPI/PPI Reweighting: CARTAC Sep 16–27, 2019. - Strengthening BOP/IIP Source Data: CARTAC Apr 2021. - Monetary and Financial Statistics: STA Sep 2020; STA 11/9–20/2020. ### Fund Relations and Financial Position (as of November 30, 2022) - Membership Status: Joined: February 21, 1963, Article VIII. - General Resources Account (SDR Million and % Quota) - Quota 382.90 100.00 - Fund holdings of currency 932.76 243.6 - Reserve tranche position 27.35 7.14 - SDR Department (SDR Million and % Allocation) - Net cumulative allocation 628.64 100.00 - Holdings 105.84 16.84 - Outstanding Purchases and Loans (SDR Million and % Quota) - Emergency Assistance 382.90 100.00 - Extended Arrangements 194.26 50.73 - Latest Financial Arrangements (Arrangements table) - SBA Nov 11, 2016 – Nov 10, 2019: Amount Approved 1,195.30 (SDR Million), Amount Drawn 0.00 (SDR Million) - EFF May 1, 2013 – Nov 10, 2016: Amount Approved 615.38, Amount Drawn 558.73 - Stand-By Feb. 4, 2010 – May 3, 2012: Amount Approved 820.50, Amount Drawn 541.80 - Outright Loans - RFI May 15, 2020 (Date of Arrangement) – Date Drawn May 19, 2020: Amount Approved 382.90 (SDR Million), Amount Drawn 382.90 (SDR Million) - Overdue Obligations and Projected Payments to Fund (SDR Million; Based on Existing Use of Resources and Present Holdings of SDRs) — Forthcoming - 2022 Principal: 18.76 - 2023 Principal: 177.45 - 2024 Principal: 247.47 - 2025 Principal: 124.05 - 2026 Principal: 9.44 - Charges/Interest: 34.19 25.92 17.24 14.72 (years not explicitly assigned in table excerpt) - Total: 18.76 211.64 273.39 141.28 24.16 - Exchange Rate Arrangements and FX - Jamaica’s de facto and de jure exchange rate arrangements are floating. - On December 31, 2022 the Jamaican dollar was trading at around J$152.3 to the U.S. dollar. - Jamaica maintains a multiple currency practice, subject to IMF approval under Article VIII, Section 3, due to the absence of a mechanism to prevent exchange rate deviations by more than 2 percent. - Last Article IV Consultation and Program Relations - Jamaica RFI, SDR 382.90 million (100 percent of quota) Rapid Financing Instrument (RFI) approved May 15, 2020. - Last Article IV consultation completed by the Executive Board in February 2022. - Fund credit outstanding will reach about 4.4 percent of GDP or 12 percent of exports by end FY 2022/23. - Safeguards Assessment: An update assessment of the BoJ is in progress. The 2017 update safeguards assessment found relatively strong safeguards in place. ### Technical Assistance (Since 2017) — Departmental highlights - FAD: Multiple missions including Special Economic Zones, Medium-Term Expenditure Framework, Treasury Reporting, Tax Compliance, TADAT Assessment, Discretionary tax waivers, International Taxation (dates include April 2022; September 2021; August 2021; April 2021; January 2018; July 2017; April 2017). - LEG/MCM: Central Bank Governance Reform (July 2017); Resolution Framework for Banks (July 2017). - MCM: Extensive missions on pension fund stress tests, bank financial analysis, foreign exchange operations, macroprudential framework, bank restructuring and crisis management, liability management, central bank modelling and forecasting, and more (dates ranging from May 2016 to March 2018 and beyond). - STA: Government Finance Statistics missions Oct 23 – November 3, 2017; August 13–24, 2018. ### CARTAC Technical Assistance to Jamaica in FY2020–FY2022 (selected) - CARTAC delivered approximately -- field person weeks of TA to Jamaica in customs and tax administration, public financial management, statistics, and financial markets (field person weeks unspecified in excerpt). - Notable activities and dates include: - Macroframework Foundation Tool, First Delivery 5/17/2021–5/21/2021. - Financial Programming and Policies 12/15/2020–12/18/2020. - Jamaica - TA - BOP/IIP - Enhance Source Data 1/17/2022–1/28/2022. - Basel II/III (Pillar I) Implementation Follow-Up Missions 10/2/20–10/15/20 and 2/22/21–2/26/21. - Dynamic Stress Test for Banks 10/2/2021–10/08/2021. - Enhance Systemic Risk Monitoring 4/11/2022–4/15/2022. ### Collaborations with Other International Financial Institutions (as of November 31, 2022) - Jamaica has collaborations with: - The World Bank Group - Inter-American Development Bank - Caribbean Development Bank ### Statistical Issues (As of December 12, 2022) - Overall assessment: Data provision has some shortcomings but is broadly adequate for surveillance. - National Accounts - STATIN provides annual GDP by activity and expenditure at current and constant 2007 prices, and quarterly current and constant estimates by economic activity. - Progress on supply and use tables (SUT) and rebasing to 2014 has been slow due to high staff turnover and focus on ongoing annual and quarterly estimates. - Assistance provided by Statistics Canada, STA, and CARTAC. - Price Statistics - CPI expenditure weights updated with 2017 Household Expenditure Survey; index series starting January 2020. - Substantial progress on export and import price indexes (XMPIs) by reducing reliance on volatile unit value indices from Customs. - STATIN compiles PPI monthly covering mining and manufacturing (base 2005 =100). Plans to expand PPI coverage to electricity, gas, services. - Government Finance Statistics - Budgetary central government operations and public debt data (except non-guaranteed debt by public entities) updated monthly. - Budgetary data excludes revenues and expenditures financed by Appropriations in Aid; incomplete picture of central government finances. - Data on public entities outside the consolidated fund available with lag of more than a month. - Monetary and Financial Statistics - BOJ submits MFS to STA using SRFs; MFS generally conform to MFSMCG concepts. - BOJ does not yet report data for the Other Financial Corporations sector for IFS dissemination. - Financial Soundness Indicators (FSIs) are not reported to STA; BOJ needs to update action plan for FSIs. - BOJ reports several Financial Access Survey (FAS) series; does not report gender-disaggregated data. - Balance of Payments - BOJ reports quarterly BOP and IIP in BPM6 format and monthly International Reserves and Foreign Currency Liquidity. - Participates in World Bank’s QEDS with Gross External Debt Position data. - Shortcomings remain for direct investment data and coverage of nonfinancial sector; external debt data excludes intercompany debt. - Data Standards and Reporting - Participant in GDDS since February 28, 2003. - Implemented e-GDDS in 2017 and publishes core economic data aligned with Table of Common Indicators Required for surveillance via the National Summary Data Page. - No data ROSC is available. - No data on industrial production, wholesale or producer prices, import volumes, or export and import prices have been reported for IFS publication in recent years. - Detailed quarterly BOP and IIP reported for BOPSY and IFS; IIP data reported since September 2007 (annual since 2005; quarterly since 2012). - Monthly balance sheet data for Bank of Jamaica and Other Depository Corporations reported with long lags. - Limited fiscal data for budgetary central government and National Insurance Fund historically reported; improvements hampered by lack of resources and staff changes. ### Table of Common Indicators Required for Surveillance (As of December 15, 2022) — Date highlights - Exchange Rates: Date of Latest Observation 12/22; Date Received 12/22; Frequency: D (Daily) for Data, Reporting, Publication. - International Reserve Assets and Reserve Liabilities of the Monetary Authorities: Date of Latest Observation 06/22; Date Received 08/22; Frequency M (Monthly). - Reserve/Base Money: 07/22 (Latest), 08/22 (Received), Frequency M. - Broad Money: 07/22 (Latest), 08/22 (Received), Frequency M. - Central Bank Balance Sheet: 07/22 (Latest), 08/22 (Received), Frequency M. - Consolidated Balance Sheet of the Banking System: 06/22 (Latest), 08/22 (Received), Frequency M. - Interest Rates: 12/22 (Latest), 12/22 (Received), Frequency D. - Consumer Price Index: 11/22 (Latest), 12/22 (Received), Frequency M. - Revenue, Expenditure, Balance and Composition of Financing – Selected Public Bodies: 10/22 (Latest), 12/22 (Received), Frequency M. - Revenue, Expenditure, Balance and Composition of Financing – Central Government: 10/22 (Latest), 12/22 (Received), Frequency M. - Stocks of Central Government and Central Government-Guaranteed Debt: 10/22 (Latest), 12/22 (Received), Frequency M. - External Current Account Balance: Q2/2022 (Latest), 10/22 (Received), Frequency Q. - Exports and Imports of Goods and Services: 08/2022 (Latest), 12/22 (Received), Frequency M. - GDP/GNP: Q2/2022 (Latest), 09/22 (Received), Frequency Q. - Gross External Debt: 06/2022 (Latest), 10/22 (Received), Frequency M. - International Investment Position: Q2/2022 (Latest), 10/22 (Received), Frequency Q. ### Statement by the Staff Representative on Jamaica (February 6, 2023) - Provides an update on events after the staff report was finalized; additional information does not change the thrust of the staff appraisal. - Noted event: An alleged fraud in a small securities dealer—Stocks and Securities Limited (SSL)—holding assets of about US$120 million—highlighted weak risk management practices in the company. *Source: Staff Report for the 2022 Article IV Consultation — Informational Annex (as provided).* ### 0.8 percent of the assets of the non-bank financial system). The alleged f rau d reportedly ### 1jamea2023001 - 0.8 percent of the assets of the non-bank financial system) ### Incident and impact - The alleged f rau d reportedly amounts to US$6-19 million. It has had no systemic impact. - Size context: 0.8 percent of the assets of the non-bank financial system. - Securities dealers account for about one-third of the assets of the non-bank financial sector. ### Regulatory response and actions taken - The Financial Services Commission (FSC)—the regulator of non-bank financial institutions—issued an injunction imposing a strict reporting requirement on SLL, barring it from disposing of assets or accepting new deposits without authorization. - The FSC obtained a court order blocking SSL’s directors from winding down the company and liquidating assets. - The head of the FSC resigned and was replaced by the central bank’s (BOJ) chief prudential officer. - Most of the FSC Board was replaced with senior BOJ executives. - Financial soundness indicator for securities dealers: capital adequacy of about 22 percent, well above the 14 percent minimum, and liquid assets of 13 percent of total assets. ### Reform plans and Fund engagement - Authorities intend to move toward a unified regulatory structure, centered in the BOJ. - Short-term: the FSC will continue to supervise the non-bank financial system but with stricter regulations and penalties for misconduct for securities dealers. - Over time: the government will propose legislation to provide the BOJ with the mandate for prudential oversight over banks and nonbanks, with the FSC focused on overseeing market regulation and consumer protection. - Rationale: the financial system is dominated by financial conglomerates; a unified supervision model under the BOJ would be consistent with efforts already underway to ensure consolidated supervision for financial intermediaries. - The authorities have requested Fund CD support to design such a system. *Source: 1jamea2023001 - 0.8 percent of the assets of the non-bank financial system).* --- _Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1jamea2023001.pdf_