## 1jamea2023004 - EXECUTIVE SUMMARY

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---

### Context and Outlook
- Jamaica maintains commitment to macroeconomic stability and strong policy frameworks amid external risks: tighter global financial conditions, commodity price volatility, and natural disasters.
- Growth:
  - FY2022/23 GDP growth estimated at 4.3 percent; FY2023/24 growth expected to fall to around 1.7 percent.
  - Note: The FY2022/23 GDP was revised after the first review discussions; the revision resulted in higher growth (4.7 percent) and a revised GDP deflator (staff will discuss implications with the authorities).
- Inflation:
  - Headline inflation at end-May was 6.1 percent.
  - Core inflation fell to 4.2 percent.
  - Inflation expected to fall to the mid-point of the BOJ’s target band by year-end (BOJ target band: 4-6 percent).
- External sector:
  - Current account deficit estimated close to 0.3 percent of GDP in FY2022/23.
  - Net international reserves were US$4.15 billion by end-March 2023, equivalent to 116 percent of the ARA metric at end-March 2023 and above the indicative target of US$3.53 billion.
- Public debt and fiscal:
  - Public debt estimated at 80 percent of GDP at end-FY2022/23, falling by 30 percentage points of GDP since FY2020/21.
  - FY2022/23 overall fiscal balance of the central government was J$7.8 billion (indicative target J$7.5 billion).
  - FY2023/24 budget aims for a primary surplus of 5.7 percent of GDP and would lower public debt to 75 percent of GDP by end of the fiscal year.
  - Authorities target a 60 percent debt-to-GDP ratio by FY2027/28 per the Fiscal Responsibility Law.
  - Total cost of the wage bill reform is estimated at J$120 billion.
- Financial sector:
  - Capital adequacy of DTIs at 14.2 percent at end-March (regulatory minimum 10 percent).
  - NPL ratio at 2.4 percent.
  - Banks’ funding dominated by local deposits; banks increasing capital to cover unrealized losses from higher interest rates.

### Precautionary and Liquidity Line (PLL) Review
- Recommendation:
  - Staff recommends completion of the First PLL Review because all indicative targets and structural benchmarks have been met and Jamaica continues to meet PLL qualification criteria.
  - Authorities intend to continue to treat the PLL as precautionary.
- Performance under the arrangement — Indicative targets and structural benchmarks met:
  - FY2022/23 overall fiscal balance: J$7.8 billion (indicative target J$7.5 billion).
  - Net international reserves: US$4.15 billion by end-March 2023 (indicative target US$3.53 billion).
  - National Statistical Committee (NSC) established in March 2023 (BOJ, MFPS, STATIN) to implement an action plan targeting subscription to SDDS.
  - Parliament approved amendments to the Companies Act in March 2023.

### Resilience and Sustainability Facility (RSF)
- Disbursement:
  - Completion of RSF first-review reforms allows for disbursements of SDR191.45 million (50 percent of quota) under the Resilience and Sustainability Trust.
- RSF-supported reforms completed for first review:
  - MFPS adopted a National Natural Disaster Risk Financing policy by end-June 2023 (supported by the World Bank).
  - Policy and Institutional Framework for PPPs amended to include climate requirements; Standard Operating Procedure Manual reflects these requirements (completed by end-March 2023; supported by IDB).
  - Electric Vehicle Policy approved by cabinet and submitted to parliament for information by end-June 2023 (with IDB support).
  - Guidelines to reduce energy use in schools, hospitals, and public buildings for existing and new structures approved by end-June 2023 (technical assistance from IDB).
- RSF objectives:
  - Accelerate transition to renewable power generation.
  - Increase resilience to climate change.
  - Enhance climate focus in fiscal policy frameworks.
  - Strengthen management of climate risks by financial institutions.
  - Potential to catalyze climate financing going forward.

### Impact of Resilient Public Infrastructure (DSGE model results)
- Scenario comparison: baseline without resilient public investments vs. resilient investment increasing to 80 percent of total public capital.
- Assumptions:
  - Resilient investment costs 25 percent more (per Ex-Post Damage Assessments from the World Bank).
  - Fiscal position assumed consistent with the MTFF.
- Model results and components (model-based IMF staff estimates preserved exactly):
  - Long-term increase in the level of GDP of about 3½ percent by 2050.
  - Long-run fiscal gains of about 0.35 percent of GDP per year.
  - Net annual saving estimated as 0.352 (percent of steady state GDP as per model-based IMF staff estimates).
  - Components:
    - Total Return 1.237
    - Stock saving (Decrease in reconstruction cost after NDs) 0.160
    - Flow saving (Moderation of output decline after NDs) 0.000
    - Steady State (Increase in output, investment, employment) 1.077
    - Cost of resilience 0.885
    - Net annual saving 0.352

### Policies under the Arrangements
A. Macroeconomic Policies
- FY2023/24 budget aligned with MTFF: primary surplus target 5.7 percent of GDP; projected public debt 75 percent of GDP by end-FY2023/24.
- Authorities committed to sizable primary surpluses over the medium term to reach 60 percent debt-to-GDP by FY2027/28.
- Wage bill reform frontloaded in FY2022/23; wage bill expected to decline as a share of GDP in FY2023/24.
- Tight control over non-wage spending; RSF supports efforts to create fiscal space for contingencies.

B. Strengthening Institutions
- Fiscal governance actions:
  - Head of independent Fiscal Commission sworn in.
  - Fiscal Research Institute endowed at the University of West Indies.
  - New tax administration information system improving compliance.
  - Efforts to secure parliamentary approval of a new Customs Act to improve customs clearance and simplify business procedures.
  - Expansion of coverage of fiscal accounts, strengthened cash management, and improved fiscal risks reporting.
  - C-PIMA informed RSF reforms; authorities working with IDB to adopt climate budget tagging.
- Safeguards:
  - Updated safeguards assessment completed in April; BOJ financial reporting and audit practices broadly guided by international standards.
  - Recent amendments to the BOJ Act strengthened bank autonomy and governance.
  - Operational frameworks mitigate risks from JAM-DEX (digital currency); internal audit coverage being strengthened; independence of external audit expected to be enhanced via selection and rotation policy.

C. Financial System Oversight and AML/CFT Framework
- Adoption of Basel III standards and expansion of BOJ supervisory authority ongoing.
- Implementation of Pillar 2 underway; first draft framework for designating Domestic Systemically Important Financial Institutions prepared (structural benchmark for end-September 2023).
- Pillar 3 to focus on market disclosures and additional capital and liquidity requirements.
- BOJ will have supervisory responsibility over credit unions once relevant legislation is approved by parliament.
- PLL supports efforts to bring AML/CFT framework to international best practice; currently emphasis on implementation of beneficial ownership, licensing and supervision of TCSPs, and demonstrating effective application of the AML/CFT regime.

### Key Statistics and Targets (selected exact figures)
- FY2022/23 GDP growth estimated at 4.3 percent; revised estimate noted at 4.7 percent post-review.
- FY2023/24 growth expected around 1.7 percent.
- Headline inflation end-May: 6.1 percent; core inflation 4.2 percent.
- BOJ policy rate: 7 percent since mid-November 2022 (up from ½ percent in September 2021).
- Net international reserves: US$4.15 billion by end-March 2023; indicative target US$3.53 billion.
- Resilience and Sustainability Trust disbursement: SDR191.45 million (50 percent of quota).
- Public debt: 80 percent of GDP at end-FY2022/23; target 75 percent by end-FY2023/24; target 60 percent by FY2027/28.
- FY2022/23 overall fiscal balance: J$7.8 billion (indicative target J$7.5 billion).
- Capital adequacy of DTIs: 14.2 percent at end-March; regulatory minimum 10 percent.
- NPL ratio: 2.4 percent.
- Total cost of wage bill reform: J$120 billion.

### Institutional Strength, Data, and Supervision
- Jamaica performs strongly in three out of five PLL qualification areas; continues to meet qualification requirements for a PLL arrangement.
- Data adequacy roadmap and SDDS subscription:
  - STATIN to present a restructuring plan to the MOFPS by end-November 2023.
  - BOJ to compile and submit IRFCL template data for August 2023 by end-September 2023.
  - MOFPS to compile and disseminate general government operations data for fiscal years 2021/22 and 2022/23 on NSDP by end-March 2024.
  - BOJ to conduct Non-Financial Corporation Survey to obtain Direct Investment Intercompany Lending positions for each quarter of 2023 by end-June 2024.
  - If implemented, action plan should ensure subscription to SDDS by mid-2025.
- Roadmap to unify financial supervision (twin peaks): BOJ as sole prudential regulator over time; interim strengthened remit for FSC; technical work supported by Fund and World Bank.
- Strengthening supervision and resolution:
  - New FHC license issued; amendments to Financial Services Act to place supervision of financial conglomerates without DTIs under FSC (PLL structural benchmark end-September 2023).
  - Technical work to prepare a bill to strengthen resolution of non-viable financial institutions (PLL structural benchmark end-March 2024).

### Debt Sustainability, Financing, and Risk Assessment (selected figures)
- Debt sustainability:
  - Central government debt declined from 142 percent of GDP at end-FY2009/10 to 80 percent of GDP at end-FY2022/23.
  - Debt is sustainable with high probability; Jamaica has an excellent track record over-performing on fiscal targets for more than a decade.
- Capacity to repay the Fund (as stated):
  - Debt outstanding and debt service to the IMF in a PLL purchase scenario would reach around 375 percent of quota (225 percent of quota excluding the RSF) or 10 percent of GDP in 2024.
  - Debt service to the Fund, including resources drawn under the RSF, would peak at SDR 409 million (about 2.5 percent of GDP).
- Program financing and access (selected dates and cumulative access):
  - March 1, 2023: Board approval of the PLL — 459.481 millions SDRs cumulative; 206 percent of quota; 3 percent of total access, cumulative.
  - August 31, 2023: First review based on March 31, 2023 quantitative targets — 459.481 millions SDRs cumulative; 206 percent of quota; 3 percent of total access, cumulative.
  - February 29, 2024: Second review based on September 30, 2023 quantitative targets — 727.5 millions SDRs cumulative; 190 percent of quota; 100 percent of total access, cumulative.
  - Total RSF credit available: 574.351 millions SDR (150 percent of quota).
  - Memorandum item: Quota = 382.90.

### Annex I — External Economic Stress Index (ESSI) (summary)
- Purpose: captures evolution of external environment for Jamaica using key external risks, proxy variables, and data-based weights.
- Main external vulnerabilities:
  - dependence on fuel and food imports (commodity price volatility);
  - dependence on global financial conditions for external financing to EMDEs;
  - sensitivity to growth in trading partners (Canada, United Kingdom, United States) affecting remittances, FDI, and exports.
- Proxy variables and weights:
  - Oil prices weight: 0.13
  - Food prices weight: 0.13
  - Funding costs weight: 0.07
  - Volatility (VIX) weight: 0.05
  - Trading partner GDP growth weight: 0.62
- Scenarios:
  - Updated baseline (April 2023 WEO): external economic stress projected to remain high relative to pre-Covid but somewhat less than at PLL request.
  - Revised downside scenario: global credit supply shock could reduce global growth to about 1 percent, trading partner growth about 1.8 percentage points below baseline in 2023; commodity prices fall, inflation and policy rates decline endogenously; stress softens in 2024 but GDP level remains below baseline.
- Overall: external pressures under revised adverse scenario remain high but projected to soften, particularly in 2023—though still above the baseline.

### Debt Coverage, DSA Notes, and Risk Analysis (selected exact entries)
- Debt coverage perimeter: central government, public bodies, and debt guaranteed by central government.
- Residual maturity: 11 years.
- Realism of baseline: "The realism analysis does not point to major concerns."
- Debt fanchart module:
  - Fanchart width: 44.00.6 (percent of GDP)
  - Terminal debt-to-GDP x: 28.90.6
  - Debt fanchart index (DFI): 1.4
  - Risk signal: Moderate
- Gross Financing Needs (GFN) module:
  - Average baseline GFN: 6.42.2 (percent of GDP)
  - GFN financeability index (GFI): 7.1
  - Risk signal: Low
- Medium-term final assessment:
  - Prob. of missed crisis, 2023-2028, if stress not predicted: 9.1 pct.
  - Prob. of false alarms, 2023-2028, if stress predicted: 48.9 pct.
  - Overall medium-term signal: Low to Moderate depending on module.
- Long-term risk assessment: Moderate; demographic and pension pressures point to need for parametric reform of public pension system.

### RSF Reform Measures — Selected RM Status (as presented)
- Pillar 1 (adaptation):
  - RM1: MOFPS adopt National Natural Disaster Risk Financing policy — Target: 1st PLL Review (End-June 2023). Status: Met. TA: World Bank.
  - RM2: DBJ with MOFPS modify PPP Policy and revise PPP SOP Manual to include climate requirements — Target: 1st PLL Review (End-March 2023). Status: Met. TA: IDB.
  - RM3–RM6: Methodologies, selection criteria, fiscal risk analysis, and NDRF legal amendments — Targets: End-Dec. 2023 to End-March 2024. Status: On track.
- Pillar 2 (mitigation):
  - RM8: MSET submit Electric Vehicle Policy to parliament — Target: 1st PLL Review (End-June 2023). Status: Met. TA: IDB.
  - RM9: MSET approve energy efficiency guidelines for schools, hospitals, public buildings — Target: 1st PLL Review (End-June 2023). Status: Met. TA: IDB.
  - RM7: Bill to incentivize investment in renewables through fiscal measures — Target: End-June 2024. Status: On track.
- Pillar 3 (green finance):
  - RM10: BOJ publish climate risks assessment and timeline to embed risks in supervision — Target: End-Dec. 2023. Status: On track. TA: French Dev. Agency.
  - RM11: Adopt monitoring framework and reporting requirements for climate stress testing — Target: End-June 2024. Status: On track.
  - RM12: Establish institutional framework for green-bond issuance and trading — Target: End-June 2024. Status: On track. TA: World Bank/Green Climate Fund.

### Staff Appraisal and Recommendation
- Staff appraisal: Entrenched macroeconomic stability and sound policy frameworks support economic growth and enable navigation of complex global environment.
- Recommendation: Staff recommends completion of the first review under the PLL and the RSF arrangements given strong macroeconomic performance and fulfillment of indicative targets and structural benchmarks.
- Program outlook: Jamaica treats PLL as precautionary; authorities expect to be in a strong position to exit the PLL by end-2024 as external risks subside and external buffers continue to grow.

*Source: IMF staff report — EXECUTIVE SUMMARY and related excerpts for Jamaica (concluding discussions in Kingston during June 12–16, 2023; staff team led by Esteban Vesperoni).*

### EXECUTIVE SUMMARY

### 1jamea2023004 - EXECUTIVE SUMMARY

### Context and Outlook
- Jamaica maintains commitment to macroeconomic stability and strong policy frameworks, enabling navigation of a difficult global environment.
- Significant risks include tighter than expected global financial conditions, commodity price volatility, and natural disasters.
- Growth:
  - FY2022/23 GDP growth estimated at 4.3 percent; FY2023/24 growth expected to fall to around 1.7 percent.
  - Note: The FY2022/23 GDP was revised after the first review discussions; the revision resulted in higher growth (4.7 percent) and a revised GDP deflator (staff will discuss implications with the authorities).
- Inflation:
  - Headline inflation at end-May was 6.1 percent.
  - Core inflation fell to 4.2 percent.
  - Inflation expected to fall to the mid-point of the BOJ’s target band by year-end (BOJ target band: 4-6 percent).
- External sector:
  - Current account deficit estimated close to 0.3 percent of GDP in FY2022/23.
  - Net international reserves were US$4.15 billion by end-March 2023, equivalent to 116 percent of the ARA metric at end-March 2023 and above the indicative target of US$3.53 billion.
- Public debt and fiscal:
  - Public debt estimated at 80 percent of GDP at end-FY2022/23, falling by 30 percentage points of GDP since FY2020/21.
  - FY2022/23 overall fiscal balance of the central government was J$7.8 billion (indicative target J$7.5 billion).
  - FY2023/24 budget aims for a primary surplus of 5.7 percent of GDP and would lower public debt to 75 percent of GDP by end of the fiscal year.
  - Authorities target a 60 percent debt-to-GDP ratio by FY2027/28 per the Fiscal Responsibility Law.
  - Total cost of the wage bill reform is estimated at J$120 billion.
- Financial sector:
  - Capital adequacy of DTIs at 14.2 percent at end-March (regulatory minimum 10 percent).
  - NPL ratio at 2.4 percent.
  - Banks’ funding dominated by local deposits; banks increasing capital to cover unrealized losses from higher interest rates.

### Precautionary and Liquidity Line (PLL) Review
- Staff recommends completion of the First PLL Review because:
  - All indicative targets and structural benchmarks have been met.
  - Jamaica continues to meet the PLL qualification criteria.
  - Authorities remain committed to implementing the strong policy agenda supported by the PLL arrangement.
- The authorities intend to continue to treat the PLL as precautionary.
- Performance under the arrangement:
  - All indicative targets and structural benchmarks met:
    - FY2022/23 overall fiscal balance: J$7.8 billion (indicative target J$7.5 billion).
    - Net international reserves: US$4.15 billion by end-March 2023 (indicative target US$3.53 billion).
    - National Statistical Committee (NSC) established in March 2023 (BOJ, MFPS, STATIN) to implement an action plan targeting subscription to SDDS.
    - Parliament approved amendments to the Companies Act in March 2023.

### Resilience and Sustainability Facility (RSF)
- Authorities completed all reform measures for the first review.
- Completion allows for disbursements of SDR191.45 million (50 percent of quota) under the Resilience and Sustainability Trust.
- RSF-supported reforms and measures completed:
  - MFPS adopted a National Natural Disaster Risk Financing policy by end-June 2023 (supported by the World Bank).
  - Policy and Institutional Framework for PPPs amended to include climate requirements; Standard Operating Procedure Manual reflects these requirements (completed by end-March 2023; supported by IDB).
  - Electric Vehicle Policy approved by cabinet and submitted to parliament for information by end-June 2023 (with IDB support).
  - Guidelines to reduce energy use in schools, hospitals, and public buildings for existing and new structures approved by end-June 2023 (technical assistance from IDB).
- RSF objectives:
  - Accelerate transition to renewable power generation.
  - Increase resilience to climate change.
  - Enhance climate focus in fiscal policy frameworks.
  - Strengthen management of climate risks by financial institutions.
  - Potential to catalyze climate financing going forward.

### Impact of Resilient Public Infrastructure (Box 1)
- Staff used a DSGE model to compare a baseline without resilient public investments to a scenario with resilient investment increasing to 80 percent of the total.
- Assumptions:
  - Resilient investment costs 25 percent more (as per Ex-Post Damage Assessments from the World Bank).
  - Fiscal position assumed consistent with the MTFF.
- Model results:
  - Long-term increase in the level of GDP of about 3½ percent by 2050.
  - Long-run fiscal gains of about 0.35 percent of GDP per year.
  - Net annual saving estimated as 0.352 (percent of steady state GDP as per model-based IMF staff estimates).
  - Components (model outputs as presented):
    - Total Return 1.237
    - Stock saving (Decrease in reconstruction cost after NDs) 0.160
    - Flow saving (Moderation of output decline after NDs) 0.000
    - Steady State (Increase in output, investment, employment) 1.077
    - Cost of resilience 0.885
    - Net annual saving 0.352

### Policies under the Arrangements
A. Macroeconomic Policies
- FY2023/24 budget aligned with MTFF: primary surplus target 5.7 percent of GDP; projected public debt 75 percent of GDP by end-FY2023/24.
- Authorities committed to sizable primary surpluses over the medium term to reach 60 percent debt-to-GDP by FY2027/28.
- Wage bill reform frontloaded in FY2022/23; wage bill expected to decline as a share of GDP in FY2023/24.
- Tight control over non-wage spending; RSF supports efforts to create fiscal space for contingencies.

B. Strengthening Institutions
- Fiscal governance:
  - Head of independent Fiscal Commission sworn in.
  - Fiscal Research Institute endowed at the University of West Indies.
  - New tax administration information system improving compliance.
  - Efforts to secure parliamentary approval of a new Customs Act to improve customs clearance and simplify business procedures.
  - Expansion of coverage of fiscal accounts, strengthened cash management, and improved fiscal risks reporting.
  - C-PIMA informed RSF reforms; authorities working with IDB to adopt climate budget tagging.
- Safeguards:
  - Updated safeguards assessment completed in April; BOJ financial reporting and audit practices broadly guided by international standards.
  - Recent amendments to the BOJ Act strengthened bank autonomy and governance.
  - Operational frameworks mitigate risks from JAM-DEX (digital currency); internal audit coverage being strengthened; independence of external audit expected to be enhanced via selection and rotation policy.

C. Financial System Oversight and AML/CFT Framework
- Adoption of Basel III standards and expansion of BOJ supervisory authority ongoing.
- Implementation of Pillar 2 underway; first draft framework for designating Domestic Systemically Important Financial Institutions prepared (structural benchmark for end-September 2023).
- Pillar 3 to focus on market disclosures and additional capital and liquidity requirements.
- BOJ will have supervisory responsibility over credit unions once relevant legislation is approved by parliament.
- AML/CFT framework: PLL supports efforts to bring AML/CFT framework to international best practice (program emphasis).

### Key Statistics and Targets (as stated)
- FY2022/23 GDP growth estimated at 4.3 percent; revised estimate noted at 4.7 percent post-review.
- FY2023/24 growth expected around 1.7 percent.
- Headline inflation end-May: 6.1 percent; core inflation 4.2 percent.
- BOJ policy rate: 7 percent since mid-November 2022 (up from ½ percent in September 2021).
- Net international reserves: US$4.15 billion by end-March 2023; indicative target US$3.53 billion.
- Resilience and Sustainability Trust disbursement: SDR191.45 million (50 percent of quota).
- Public debt: 80 percent of GDP at end-FY2022/23; target 75 percent by end-FY2023/24; target 60 percent by FY2027/28.
- FY2022/23 overall fiscal balance: J$7.8 billion (indicative target J$7.5 billion).
- Capital adequacy of DTIs: 14.2 percent at end-March; regulatory minimum 10 percent.
- NPL ratio: 2.4 percent.
- Total cost of wage bill reform: J$120 billion.

*Source: IMF staff report — EXECUTIVE SUMMARY for Jamaica (concluding discussions in Kingston during June 12–16, 2023; staff team led by Esteban Vesperoni).*

### 15.      Efforts continue to strengthen the supervisory framework for financial holding

### 15.      Efforts continue to strengthen the supervisory framework for financial holding companies (FHC) and the resolution regime of non-viable financial institutions

### Strengthening supervision of FHCs and resolution regime
- The BOJ has recently licensed another FHC and will now supervise the entity.
- Amendments to the Financial Services Act are intended to place supervision of financial conglomerates without DTIs under the Financial Service Commission (FSC)—PLL structural benchmark for end-September 2023.
- Technical work is underway to prepare a bill to strengthen the resolution of non-viable financial institutions while protecting financial stability and minimizing the recourse to public funds—PLL structural benchmark for end-March 2024.

### Roadmap to unify financial supervision (twin peaks)
- Authorities intend to organize supervision under a “twin peaks” regime, with the BOJ as the sole prudential regulator.
- The roadmap for unification is being finalized with capacity development support from the Fund and the World Bank.
- In the interim, the FSC will continue to supervise the non-bank financial system, with its mandate strengthened by the amended FSC Act.

### AML/CFT framework enhancements and implementation
- The Judicial Committee of the UK Privy Council upheld the application of AML/CFT legislation to Attorneys-at-Law, subjecting them to provisions of the Proceeds of Crime Act.
- At end-March, parliament approved amendments to the Companies Act to:
  - (i) make the definition of beneficial ownership (BO) consistent with FATF standards;
  - (ii) introduce sanctions for breaching basic and BO obligations;
  - (iii) grant the Registrar of Companies powers to ensure compliance.
- FSC has in place the risk-based supervision (RBS) methodology for Trust and Corporate Services Providers (TCSPs), started licensing and risk profiling TCSPs before the April application deadline, and is preparing onsite examinations informed by risk profiling.
- Authorities state they have completed all legislative requirements in the action plan to improve the AML/CFT framework; current efforts focus on implementation, including:
  - (i) application of the beneficial ownership provisions approved by parliament, dependent on the reporting schedule of corporations;
  - (ii) making the BO registry more comprehensive and effective;
  - (iii) applying due process to complete implementation of the RBS framework for TCSPs.
- These steps aim to help limit corruption vulnerabilities.

### Climate policies under the RSF — areas of focus
- Resilience to natural disasters and climate change:
  - Following approval of amendments to the policy framework for public private partnerships (RM2), with IDB technical support, the Public Investment Appraisal Branch is working on the methodology to conduct climate impact assessment of investment projects (RM3).
  - The Planning Institute of Jamaica is defining project selection criteria that will encompass climate considerations (RM4).
  - Supported by the World Bank, the National Natural Disaster Risk Financing Policy has been adopted (RM1).
  - Amendments to the Financial Administration and Audit Act are being prepared to establish the National Natural Disaster Reserve Fund (NDRF, RM6)—the MOF submitted to Cabinet an amendment to locate the NDRF in the Consolidated Fund.
  - With Fund capacity development support, methodologies for climate-related fiscal risks analysis are being developed (RM5).
- Greening of the financial sector:
  - BOJ, supported by the French Development Agency, is working on an assessment of climate risks, a timeline to incorporate climate considerations into supervisory activities (RM10), and capacity to implement it.
  - Work will aid adoption of a monitoring framework to improve data collection and establish reporting requirements for financial institutions to implement climate-related stress testing (RM11).
  - The Green Climate Fund and the World Bank are supporting establishment of a framework for issuance of green bonds (RM12), aiding development of taxonomies and ex-post verification procedures.
- Mitigation:
  - Technical work continues on design of fiscal incentives to foster investment in renewable energy (RM7).
  - Supported by the IDB, authorities adopted the electric vehicles policy (RM8) and energy efficiency guidelines for public buildings (RM9).

### RSF financing, fiscal space, and private climate financing
- RSF resources will be disbursed as budget support and substitute for more expensive market financing, creating fiscal space by lowering financing costs and improving debt dynamics.
- Reforms under the RSF are expected to mitigate the impact of climate shocks and reallocate public investment towards climate goals.
- Mitigation measures are expected to generate fiscal savings over the medium term given sizeable investment needs and time required for adoption of efficiency guidelines.
- The Memorandum of Understanding between the MOFPS and the BOJ defining responsibilities associated with the RSF financing was signed in April.
- Efforts to catalyze private climate financing:
  - RSF reforms and incentives for renewables are expected to foster investor confidence and incentivize private investment.
  - IDB technical assistance will support development of a pipeline of bankable climate initiatives (project identification, prioritization, feasibility assessment, implementation support, structuring).
  - Sound, climate risk-aware financial supervision can help manage transitional risks; the green bond framework should strengthen market participation.
  - The World Bank is completing a Development Policy Financing operation of US$150 million targeting the transition to a low carbon economy and increasing fiscal and financial resilience to climate change.
  - The IDB country strategy focuses on developing private sector financing and supporting technologies to reduce emissions and increase climate resilience.
  - Authorities continue to work with Global Affairs Canada to define a framework to expand official climate financing.
  - DMD Bo Li and the IMF Climate Finance Task Force head met with authorities, development partners, and the private sector in Kingston last June to explore frameworks to catalyze private climate financing in the context of the RSF.

### Strengthening data adequacy
- A roadmap to improve data adequacy was developed following an SDDS assessment mission by the Fund Statistics Department.
- Action plan and benchmarks include:
  - STATIN to present a restructuring plan to the MOFPS by end-November 2023—to facilitate implementation during FY2024/25.
  - Compilation and submission to the Fund’s Statistics Department the International Reserve and Foreign Currency Liquidity template data for August 2023 (end-September 2023).
  - Compilation and dissemination of data for general government operations on the National Summary Data Page (NSDP) for fiscal years 2021/22 and 2022/23 (end-March 2024).
  - Conducting the Non-Financial Corporation Survey by the BOJ to obtain data for Direct Investment Intercompany Lending positions for each quarter of 2023 (end June 2024) to improve external sector data.
- If implemented, the action plan should ensure subscription to SDDS by mid-2025.

### PLL qualification assessment — key findings by area
- Jamaica continues to meet the qualification requirements for a PLL arrangement; performs strongly in three out of five PLL qualification areas.

- External Position and Market Access:
  - Criterion 1. A sustainable external position:
    - The current account deficit (CAD) has remained below 2 percent of GDP over the last 5 years, and it was more than fully financed by FDI flows (which averaged 2.3 percent of GDP).
    - The CY2022 CAD widened to 0.8 percent of GDP from a surplus of 1 percent of GDP in CY2021.
    - Reserves have been well above 80 percent of the Assessing Reserve Adequacy (ARA) metric and above 5 months of imports since 2017.
    - Gross reserves increased in Q1 2023, reaching US$4.7 billion.
  - Criterion 2. A capital account dominated by private flows:
    - Between 2018 and 2022, non-government flows represented around 2/3 of portfolio flows and 3/4 of other investment flows.
    - Foreign direct investment accounted for 50 percent, while portfolio investment accounts for 25 percent of external liabilities at end-2022.
  - Criterion 3. A track record of steady sovereign access:
    - Jamaica issued a global bond for US$815 million (158 percent of quota) between 2018 and 2022.
    - Recorded an average fiscal surplus of about 0.5 percent of GDP over the period.
    - Sovereign spreads fluctuate around 200 bps; ratings include B+ by S&P (stable) and Fitch (positive), B2 by Moody’s.
  - Criterion 4. A comfortable international reserve position:
    - Over the past three years, reserves averaged 114 percent of the ARA metric and reached 112 percent at end-2022.

- Fiscal Policy:
  - Criterion 5. Sustainable public debt position and sound public finances:
    - FRL established a public debt goal of 60 percent of GDP and a balanced budget rule.
    - Central government debt declined from 142 percent of GDP at end-FY2009/10 to 80 percent of GDP at end-FY2022/23.
    - Debt dynamics remain vulnerable to global commodity markets, natural disasters, and contingent liabilities; diverse insurance products cover about 5 percent of GDP.
    - Gross financing needs are around 5 percent of GDP (recent reductions due to debt buybacks and long-dated global bonds).
    - Note: Gross financing needs increase in FY2028/29 and FY2024/25 due to bunching of maturities.

- Monetary Policy:
  - Criterion 6. Low and stable inflation:
    - Over the last five years, inflation averaged 6 percent.
    - Inflation rose above the target band since August 2021; BOJ’s policy response and prudent fiscal policy are expected to bring inflation to the mid-point of the target band by end-2023.
    - The exchange rate regime is classified as floating with BOJ interventions to limit volatility.

- Financial Sector Soundness/Supervision:
  - Criterion 7. Sound financial system:
    - Financial sector profitable, well capitalized (CAR was 14.2 percent) and NPL 2.4 percent at end-March; latest stress tests suggest resilience to tail events.
    - Domestic risks: concentrated ownership, related party and large group exposures, and off-balance sheet positions.
    - Main external risks: further monetary tightening in advanced economies, US recession spillovers, climate-related weather events.
  - Criterion 8. Effective supervision:
    - Adoption of Basel III, risk-based supervision, crisis management and consolidated supervision advancing.
    - Jamaica is on FATF’s list of jurisdictions under increased monitoring.
    - PLL conditionality supports enhancements in supervision of financial conglomerates, resolution of institutions, and strengthening the AML/CFT framework; current efforts are concentrated on application of legislative frameworks.

- Data Adequacy:
  - Criterion 9. Data transparency and integrity:
    - Data provision broadly adequate for surveillance; Jamaica participated in GDDS since 2003 and implemented e-GDDS in 2017.
    - Improvements to national accounts and price statistics are ongoing (GDP rebasing, Household Expenditure Survey).
    - PLL includes conditionality tied to SDDS subscription roadmap.

### Institutional strength
- Jamaica has relatively good institutional quality:
  - Worldwide Governance Indicators show strong scores on Voice and Accountability and Government Effectiveness.
  - On Political Stability/Absence of Violence and other governance areas, Jamaica scores broadly at the world median.

### Debt sustainability and capacity to repay the Fund
- Debt is sustainable with high probability; Jamaica has an excellent track record over-performing on fiscal targets for more than a decade.
- In a PLL disbursement scenario, debt remains sustainable with high probability as assessed at the time of the program request; the baseline debt assessment has improved since the program request.
- Jamaica’s capacity to repay the Fund is adequate:
  - Debt outstanding and debt service to the IMF in a PLL purchase scenario would reach around 375 percent of quota (225 percent of quota excluding the RSF) or 10 percent of GDP in 2024.
  - Debt service to the Fund, including resources drawn under the RSF, would peak at SDR 409 million (about 2.5 percent of GDP).
- The program is fully financed (without RSF disbursements) over the next 12 months, with good prospects for the remainder of the program.

### Staff appraisal — macroeconomic position and outlook
- Entrenched macroeconomic stability and sound policy frameworks support economic growth and navigation of a complex global environment.
- Strong GDP growth continued during the 2022/23 fiscal year and inflation has already fallen to the upper bound of the Bank of Jamaica’s target band.
- Buoyant tourism and strong remittances have resulted in a relatively strong external position, exceeding program targets for international reserves.
- A large primary surplus continues to support a strong downward trajectory of public debt—which fell by 30 percentage points of GDP since FY2020/21—and the financial system remains well capitalized, liquid, and stable.

*Source: 1jamea2023004 - 15.      Efforts continue to strengthen the supervisory framework for financial holding companies (FHC) and the resolution regime of non-viable financial institutions*

### 28.      Fiscal and monetary policies are helping to bring down both inflation and debt. Inflation

### 1jamea2023004 - 28.      Fiscal and monetary policies are helping to bring down both inflation and debt. Inflation

### Inflation, monetary policy, and public debt
- Fiscal and monetary policies are helping to bring down both inflation and debt.
- Inflation trends suggest that the Bank of Jamaica’s data-dependent monetary policy decisions will secure convergence to the midpoint of the inflation target band by year-end.
- The budget is targeting a primary surplus that would lower public debt to 75 percent of GDP by the end of the fiscal year.
- The authorities remain committed to reach a 60 percent debt-to-GDP ratio by FY2027/28.
- The reform of the public wage structure will:
  - eliminate distortions from allowances in the salary scale, and
  - help retain skilled workers.
- The authorities continue to improve fiscal policy frameworks.

### Governance indicator context
- Worldwide Governance Indicators (WGI) project by D. Kaufmann and A. Kraay:
  - reports aggregate individual governance indicators over the period 1996–2021 for six governance dimensions.
  - combines the views of enterprises, citizens, and expert survey respondents.
  - leverages confidence intervals to reflect uncertainty.
  - notes that most inputs are perception based and thus more subjective than other economic indicators.

### Financial supervision and AML/CFT reforms
- The authorities continue efforts to improve financial supervision and bring the AML/CFT framework to international best practice.
- Key actions and objectives:
  - advancing adoption of the Basel III standards,
  - defining a roadmap to enhance financial supervision, including through adoption of a “twin-peaks” regime,
  - strengthening the AML/CFT framework in line with PLL objectives, including amending the legal framework of the beneficial ownership regime and remaining committed to demonstrate its effectiveness,
  - improving the institutional framework for consolidated supervision,
  - enhancing the financial institutions’ resolution framework,
  - defining a roadmap to improve data adequacy with associated structural benchmarks added to the PLL agenda.

### Climate agenda and the Resilience and Sustainability Facility (RSF)
- The RSF continues to support Jamaica’s ambitious climate agenda.
- Recent policy actions and approvals:
  - adoption of a disaster risk financing policy,
  - amendment of the framework for private public partnerships to include climate requirements,
  - approval of an electric vehicle policy,
  - approval of guidelines for energy efficiency in public buildings, schools, and hospitals.
- Expected effects:
  - Reforms under the RSF, incentives for investments in renewables, and greening of the financial system can foster investor confidence and catalyze private climate financing.

*Source: 1jamea2023004 - 28.      Fiscal and monetary policies are helping to bring down both inflation and debt. Inflation*

### 31.      Staff recommends the completion of the first review under the PLL and the RSF

### 31.      Staff recommends the completion of the first review under the PLL and the RSF arrangements

### Recommendation and program status
- Staff recommends the completion of the first review under the PLL and the RSF arrangements.
- Macroeconomic performance remains strong, and Jamaica continues to meet the PLL qualification criteria.
- Indicative targets and structural benchmarks under the PLL have been met.
- Reform measures 1, 2, 8, and 9 under the RSF have been completed.
- Staff supports the modification of indicative targets for the second review, as these do not imply a change in the authorities’ policy stance.
- The authorities continue to make progress on their reform agenda, and structural benchmarks and reform measures for future reviews are on track.

### Real sector developments (high-level findings)
- Post-COVID recovery continues; unemployment has fallen to historic lows.
- Tourism and hospitality industries have rebounded; most sectors recovered except mining.
- Output gap is closing with inflation dipping below the BOJ’s upper target bound.
- Source: Jamaican and IMF staff calculations (figures referenced in source).

### Fiscal sector developments (high-level findings)
- Central government fiscal balance is back in surplus due to buoyant tax revenues.
- Strong direct tax collections contributed to revenue outturns.
- Primary spending edged up slightly in FY22/23.
- Capital spending remains at its long-term average.
- Public debt is on a firm path to meet the FRL debt target.
- Source: Jamaican and IMF staff calculations (figures and tables referenced in source).

### External sector developments (high-level findings)
- Remittances receipts still boosted the current account balance in 2022 but started to decline.
- Tourism—especially from the US—recovered, returning to pre-pandemic levels in H2 2022, reducing the trade and service deficit despite high fuel prices and below-average mining exports.
- COVID hit FDI inflows, but existing tourism projects continued to be executed.
- The real effective exchange rate appreciated in 2022.
- Source: Jamaican and IMF staff calculations (figures referenced in source).

### Monetary and financial sector developments (high-level findings)
- Banking system deposits have been growing steadily with individuals and businesses dominating.
- Private credit continues to grow reflecting post-Covid rebound and good prospects going forward.
- Depository institutions retain liquidity above required minimum with moderate profitability.
- NPL ratio is very low with sufficient provisioning; capital is well above the minimum ratio and sufficient to absorb potential losses.
- Source: Jamaican and IMF staff calculations (figures and tables referenced in source).

### RSF and PLL access, timing, and conditionality
- PLL schedule and terms (selected dates and cumulative access):
  - March 1, 2023: Board approval of the PLL — 459.481 millions SDRs cumulative; 206 percent of quota; 3 percent of total access, cumulative.
  - August 31, 2023: First review based on March 31, 2023 quantitative targets — 459.481 millions SDRs cumulative; 206 percent of quota; 3 percent of total access, cumulative.
  - February 29, 2024: Second review based on September 30, 2023 quantitative targets — 727.5 millions SDRs cumulative; 190 percent of quota; 100 percent of total access, cumulative.
  - August 31, 2024: Third review based on March 31, 2024 quantitative targets — 727.5 millions SDRs cumulative; 190 percent of quota; 100 percent of total access, cumulative.
- RSF availability and conditions (selected tranches and conditions):
  - August 31, 2023: 47.862 millions SDR (12.50 percent of quota) each for completion of RSF review of reform measures 1, 2, 8, and 9 implementation.
  - February 29, 2024: 47.862 millions SDR (12.50 percent of quota) each for completion of RSF review of reform measures 3, 4, 6, and 10 implementation.
  - August 31, 2024: 47.862 millions SDR (12.50 percent of quota) each for completion of RSF review of reform measures 5, 7, 11, and 12 implementation.
  - Total RSF credit available: 574.351 millions SDR (150 percent of quota).
- Memorandum item: Quota = 382.90.

### Key fiscal and macro quantitative indicators (selected exact figures from tables)
- Population (2019): 2.73 million; Per capita GDP (2019): US$5729.
- Unemployment rate (July 2022): 6.6 percent.
- Real GDP growth (fiscal year series): 2021/22 = 8.2; 2022/23 = 3.5; Program 2023/24 = 4.3.
- Consumer price index (end of period): 2022/23 = 5.2 percent; Program 2023/24 = 5.2 percent.
- Budgetary revenue: 2022/23 = 31.3 percent of GDP; Program 2023/24 = 29.4 percent of GDP.
- Tax revenue: 2022/23 = 28.5 percent of GDP; Program 2023/24 = 26.4 percent of GDP.
- Budget balance: 2022/23 = 0.3 percent of GDP; Program 2023/24 = 0.3 percent of GDP.
- Public debt (FRL definition): 2022/23 = 80.2 percent of GDP; Program 2023/24 = 77.9 percent of GDP.
- Current account balance (percent of GDP): 2022/23 = -0.3 percent; Program 2023/24 = -2.8 percent.
- Gross international reserves (US$ millions): 2022/23 = 4,685; Program 2023/24 = 4,100.
- Broad money (M3, fiscal year, percent change): 2022/23 = 8.2 percent.
- Credit to private sector (percent of GDP): 2022/23 = 49.2 percent; 2023/24 = 57.7 percent (fiscal-year table).
- Table 3 (Balance of Payments, selected US$ millions): Current Account 2022/23 = -49; Program 2023/24 = -504; Trade balance 2022/23 = -4,741; Program 2023/24 = -4,573.
- Table 6 (Indicators of Fund Credit, selected): Fund Obligations Based on Existing and Prospective Credit (millions of SDRs) 2023 = 163.3; 2024 = 341.4; 2025 = 215.6; Percent of quota (2023) = 42.7; Percent of exports of goods and services (2023) = 3.0.
- Table 9 (External Financing Requirements, selected): Gross Financing needs (FY 2023/24 baseline) = 3,030 (US$ millions); Current account deficit (FY 2023/24 baseline) = 270; Gross international reserves (GIR) FY 2023/24 baseline = 4,600 (US$ millions).

*Source: Jamaica — IMF staff report excerpts and accompanying tables and figures.*

### Annex I. External Economic Stress Index

### Annex I. External Economic Stress Index

### Background
- The External Economic Stress Index (ESSI) captures the evolution of the external environment faced by a country.
- The index is based on a selection of: (i) key external risks facing Jamaica; (ii) proxy variables capturing these risks; and (iii) weights to apply to each of these variables.

### Risks
- The main external vulnerabilities for Jamaica are:
  - (i) dependence on fuel and food imports, exposing Jamaica to commodity price volatility;
  - (ii) dependence on global financial conditions for external financing to EMDEs; and
  - (iii) a growth in advanced economies, including Jamaica’s main trading partners—Canada, United Kingdom, and United States—which impacts remittances receipts, FDI inflows, and exports.

### Proxy variables
- Commodity price volatility is captured by international food and oil prices (WEO Commodity Food Price Index/WEO Crude Oil Price Index).
- Global financial conditions are captured by the interest rate of the 6-month U.S. treasury bond plus the EMBIG spread for Jamaica.
- The VIX captures the volatility in global financial markets.
- The weighted average of GDP growth of Canada, United Kingdom, and United States proxies growth in trading partners.

### Weights
- A data-based approach determines the weights, which were estimated using the size of related balance of payment items between 2012 and 2020:
  - weight on oil prices: 0.13 (value of fuel imports determines this weight);
  - weight on food prices: 0.13 (value of consumer goods imports determines this weight);
  - weight on funding costs: 0.07 (value of portfolio inflows is used);
  - weight on volatility: 0.05 (value of other investments is used);
  - weight for trading partner GDP growth: 0.62 (based on Jamaica’s exports, remittances, and FDI).

### Updated baseline scenario (April 2023 WEO projections)
- The updated baseline corresponds to the April 2023 WEO projections.
- The index shows that external economic stress is projected to remain high compared to the pre-Covid period, but somewhat less than at the time of the PLL request reflecting mostly lower oil price path assumptions and higher projected growth in main trading partners for 2023 while external financial conditions are tighter.

### Revised downside scenario
- The downside scenario is in line with the global downside scenario of the April 2023 WEO.
- It illustrates how shocks to global credit supply, stemming from banking sector fragility in the face of tightening monetary policy, amplified through risk-off behavior, could reduce global growth to about 1 percent.
- Under this scenario:
  - bank lending contracts;
  - corporate spreads increase;
  - a flight to safety and declining in confidence is assumed to lead to higher savings and falling consumption.
- This leads to a strong deceleration in growth in advanced economies in 2023, in which Jamaica’s main trading partners’ growth is about 1.8 percentage points below the baseline.
- Whereas the downside scenario in the PLL/RSF request featured higher fuel and food prices as well as global interest rates, under this revised scenario:
  - the fall in global demand triggers a fall in commodity prices and inflation;
  - consequently considerably lower policy rates than under the baseline as monetary policy responds endogenously.
- The shock begins to dissipate in 2024, in which growth in trading partners is about ½ percent above the baseline, but the level of GDP remains below the baseline.

### Overall assessment
- The external economic stress index suggests that external pressures under the revised adverse scenario remain high but are projected to soften, particularly in 2023—though still above the baseline.

*Sources: WEO and IMF staff estimates.*

### 1. Debt coverage in the DSA: 1/CGGGNF PSCPSOther

### 1. Debt coverage in the DSA: 1/CGGGNF PSCPSOther

### Debt coverage and consolidation
- Coverage chosen: central government, public bodies, and debt guaranteed by central government.
- 1a. If central government, are non-central government entities insignificant? Yes
- Subsectors captured in the baseline (Inclusion):
  - Budgetary central government: Yes
  - Extra budgetary funds (EBFs): No
  - Social security funds (SSFs): No
  - State governments: No
  - Local governments: No
  - Public nonfinancial corporations: Yes
  - Central bank: No
  - Other public financial corporations: No
- Commentary: The DSA covers debt issued by central government, public bodies and debt guaranteed by central government. The authorites are improving coverage and quality of public debt data, including expanding the coverage to general government.
- Reporting and valuation notes (as provided):
  - Non-cash basis and cash basis distinctions are recognized; nominal value and face value definitions are provided.
  - Market value definition: "Market value of debt instruments is the value as if they were acquired in market transactions on the balance sheet reporting date (reference date). Only traded debt securities have observed market values."
  - IPSGSs 3/ refers to "Insurance, Pension, and Standardized Guarantee Schemes, typically including government employee pension liabilities."
  - Stock of arrears could be used as a proxy in the absence of accrual data on other accounts payable. 2/

### Public debt structure and projections
- Perimeter shown in charts: central government and public nonfinancial corporations (unless otherwise noted).
- Commentary on currency and market composition:
  - The share of external debt is expected to decline over the medium-term as the authorities implement strategies and policies in support of continued development of the domestic debt market.
  - Local currency debt is projected to decline with projected fiscal surpluses over the medium-term and use of government deposits to pay down domestic debt.
  - Liability management operations and buybacks of global bonds have also reduced the stock of foreign currency debt.
  - Most planned issuances are for medium to long-term maturity.
- Residual maturity: 11 years.

### Realism of baseline assumptions and historical track record
- Forecast Track Record: projections made in the October and April WEO vintage. 1/
- Realism assessment conclusions:
  - "The realism analysis does not point to major concerns."
  - Past forecast errors do not reveal any systematic biases and the projected debt reduction is within norms.
  - Most of the debt reduction in the next five years is expected from the elevated primary balance surpluses, underpinned by the planned fiscal path under the MTFF, in line with the FRL.
  - Similar or bigger debt reductions were implemented by Jamaica in the past (during 2013-19), even though these are above the 75th percentile of the distribution as shown in the chart.
- Comparator group: Emerging Markets, Non-Commodity Exporter, Program.

### Medium-term risk analysis and financeability
- Debt fanchart module:
  - Fanchart width: 44.00.6 (percent of GDP) [as provided in source]
  - Terminal debt-to-GDP x: 28.90.6
  - Debt fanchart index (DFI): 1.4
  - Risk signal: Moderate 3/
- Gross Financing Needs (GFN) module:
  - Average baseline GFN: 6.42.2 (percent of GDP)
  - Banks' claims on the general government (pct bank assets): 10.93.5
  - Change in banks' claims in stress (pct banks' assets): 4.01.3
  - GFN financeability index (GFI): 7.1
  - Risk signal: Low 4/
- Medium-term index and final assessment:
  - Final assessment: Prob. of missed crisis, 2023-2028, if stress not predicted: 9.1 pct.
  - Prob. of false alarms, 2023-2028, if stress predicted: 48.9 pct.
  - Overall medium-term signal: Low to Moderate depending on module (GFN financeability low risk; Debt Fanchart moderate risk).
- Commentary: The GFN Financeability Module and the medium-term tools suggest low levels of risk. The Debt Fanchart Module points to a moderate level of risk, reflecting the elevated fanchart width at the end of the projection horizon due to a history of high volatility of public debt in Jamaica. In the natural disaster stress scenario, the GFN needs would temporily increase without jeopardizing the downward trend in public debt over the medium term.

### Long-term risk analysis
- Staff Commentary: Long-term risk is assessed to be moderate.
- Large amortization module: shows gradual declines in GFN and debt relative to GDP both under the baseline and customized scenarios.
- Customized scenario assumptions:
  - Real GDP growth: 2 percent
  - GDP deflator: 5 percent
  - Primary balance surplus: 1 percent of GDP
- Demographics and pension findings:
  - Pension financing needs and total benefits paid are projected across long horizons (30 years, 50 years, Until 2100).
  - Pension financing needs figures shown in header: 1.06% 1.81% 2.70% (presented as percentages in panels).
  - With current pension system, pension expenditures would lead to larger GFNs and an upward trajectory in the long run.
  - Conclusion: "This points to the need to undertake parametric reform of the current public pension system."
- Health and climate:
  - Climate-related expenditure are manageable and would not significantly impact debt sustainability.
  - Current healthcare expenditure policies would not pose significant sustainability concerns.

### External debt sustainability: stress tests and bound tests
- External debt in percent of GDP presented with multiple shocks and scenarios:
  - Individual shocks are permanent one-half standard deviation shocks. 1/
  - Permanent 1/4 standard deviation shocks applied to real interest rate, growth rate, and current account balance. 3/
  - One-time real depreciation of 30 percent occurs in 2023. 4/
- Examples of scenario labels and baseline comparisons:
  - Interest Rate Shock, CA shock, Combined shock, Real Depreciation Shock.
  - Baseline public debt level referenced repeatedly as 61 (in charts presented as "Baseline 61").
- Historical and scenario averages reported in chart annotations:
  - Baseline: 3.3, 4.0, 3.8 (context: unspecified box averages in figure)
  - Baseline: 1.7, -0.7, 0.3
  - Baseline: 0.4, -1.1, -0.5
  - Growth Shock (in percent per year) referenced.

### First Review Reform Measures: Content and Impact
- RM1: National Natural Disaster Risk Financing (DRF) policy (MOFPS)
  - Objective: adopt a National Natural Disaster Risk Financing policy to operationalize Jamaica’s Public Financial Management Policy for Disaster Risk.
  - Scope and focus:
    - Budgeting for DRF – data processes & systems.
    - Building financial and disaster risk resilience.
    - Building institutional capacity.
  - Policy features:
    - Comprehensive financing approach including use of an expanded set of insurance instruments to identify and select the most cost-effective disaster risk insurance.
    - Deploys a robust assessment of explicit and implicit contingent liabilities matched against a suitable suite of financial tools.
    - Includes an Implementation Plan identifying relevant parties and operationalization/implementation schedule.
    - Policy informed by the World Bank’s 2018 report "Advancing Disaster Risk Finance in Jamaica" and technical support of the World Bank during its preparation.
  - Implementation status: The policy was submitted to public consultation.

- RM2: PPP framework revisions to integrate climate requirements (Development Bank of Jamaica in consultation with MOFPS)
  - Objective: modify Policy and Institutional Framework for PPPs to include climate requirements from project identification to contract management and revise the PPP Standard Operating Procedure Manual.
  - Rationale:
    - PPPs have been used extensively since 2011 and will remain important for development and climate-related investment needs.
    - Prior institutional PPP framework lacked a structure for allocation of climate risks between government and PPP partners; project appraisal, selection, procurement and contract management did not integrate climate-related analysis based on a standardized methodology.
  - Actions taken:
    - Authorities amended the Policy and Institutional Framework for PPPs to integrate climate-related analysis in PPP project appraisal, selection, procurement, and contract management procedures.
    - Authorities revised the PPP Standard Operating Procedure Manual to reflect these requirements.
    - The Manual operationalizes the Policy across four PPP project phases: i) project identification; ii) business case; iii) transaction; and iv) contract management, and includes templates for each phase.
  - Technical assistance: The Policy and Manual benefitted from technical assistance of the Inter-American Development Bank (IDB).
  - Expected impact: Transparent and up-front allocation of liabilities will support proper quantification of liabilities and securing of the matching resources to control them.

*Source: IMF staff.*

### Box 1. The PPP Standard Operating Procedure Manual: Guidance by Project Phase

### Box 1. The PPP Standard Operating Procedure Manual: Guidance by Project Phase

### Embedding climate resilience across PPP project phases
- Project Identification Stage
  - Guidance to ensure projects align with Government of Jamaica (GoJ) development goals (see: 2.1.1-2.1.3) and to think, at a high-level, how climate risks can affect the potential project.
- Business Case Stage
  - Guidance to embed climate resilience into technical, financial, economic, and environment analyses to determine PPP viability and suitability.
- Transaction Stage
  - Guidance for DBJ PPP teams/Enterprise teams to embed climate resilience in designing the contract, qualifying bidders, tendering the project, and evaluating bids received.
- Contract Management Stage
  - Decision support tools to track climate-related agreements set during the Transaction Stage and manage unforeseen climate-related risks over the life of the PPP.

*Source: The PPP Standard Operating Procedure Manual, 2023.*

### RM8 — Electric Vehicles Policy (EVP) (Ministry of Science, Energy and Technology)
- Action: MSET to submit to parliament the electric vehicles policy (EVP), in line with objectives in paragraph 23 of the Written Communication.
- EVP objectives and expected impacts:
  - Sets functional standards and regulations for electric mobility, energy sector guidelines, operational codes, and guidelines for developing an electric mobility ecosystem.
  - Context: Jamaica’s mass public transportation is underdeveloped; over-reliance on cars and taxis leads to high per capita petrol consumption and a high fuel import bill, contributing to inflationary pressures.
  - Projected adoption and emissions impact: share of electric vehicles rising to about 12 percent of total privately owned fleet, 16 percent of public transport, and savings of 3 MTCO2eq over the next decade.
  - Economy-wide and socio-financial impacts estimated positive due to infrastructure investments, fuel import reductions, renewable development, and socio-financial (including health) savings from efficiency advantages of EVs over combustible engines.
- EVP provenance and components:
  - Developed based on the Strategic Framework of Electric Mobility (SFEM) adopted March 2021 with technical assistance of the IDB.
  - EVP six building blocks:
    i) Establishment of standards to enable electric mobility adoption including EV import standards and EV registration procedures.
    ii) Deployment of a public charging infrastructure network as a prerequisite to engage on this new technology transportation mode.
    iii) Existence of a competitive EV infrastructure market.
    iv) Proper management of batteries and other EV components’ second-life and recycling once EVs reach end-of-life.
    v) Promotion of specific training programs for technical experts (mechanics, first response fleet professionals such as firefighters and police).
    vi) Social awareness campaigns to incentivize EV use (communication campaigns, test rides).
  - EVP complements fiscal incentives to stimulate EV purchase and expansion.
- Notes:
  - IDB Strategic Framework for Electric Mobility. Technical Cooperation Number JA-T1172 – Sustainable Transport and Renewable Energy-Powered Electric mobility April 2020, p.11, scenario 4.
  - Charging infrastructure investment expected to be undertaken by public and private stakeholders; JPS has been building charging stations.

### RM9 — Energy efficiency guidelines for public structures (MSET)
- Action: MSET to approve guidelines adapted to the type and purpose of structures to reduce energy use in schools, hospitals, and public buildings for existing and new structures.
- Expected benefits:
  - Frees public funds through lower government bills and reduced oil imports; creates fiscal space for productive spending and contributes to greenhouse gas emissions reduction.
- Historical program benchmarks:
  - Energy Efficiency and Conservation Program (2012-2016) retrofitted public health, administrative and educational buildings; estimated savings some JD131.5 million (US$1 million).
  - Subsequent program (2017-2021) estimated to have saved more than 0.6 million barrels of oil (equivalent to 8 percent of total crude volume imported in 2020) by equipping 30 public facilities with energy efficient systems.
- Guidelines features:
  - Collate existing energy efficiency codes and standards as a centralized reference for practitioners across design, procurement, construction, operation, and maintenance.
  - Mandate use of appropriate expertise (engineers and architects) for application of codes and standards.
  - Set measures to evaluate outcomes and define processes for new and existing structures.
  - Set specific energy efficiency requirements for hospitals and schools.
  - Establish procedures for monitoring, evaluation, measurement, and verification of implementation.

### Annex IV — DSGE model to quantify return on resilient infrastructure investment
- Purpose:
  - Stylized Dynamic Stochastic General Equilibrium (DSGE) model to quantify net benefits of investing in infrastructure resilient to natural disasters (cyclones, tornadoes, floods) and macroeconomic impact of climate change via parametrized disaster frequency and intensity.
  - Recognizes agents internalize future natural disaster risk, leading to lower investment and output even absent realized disasters.
- Model calibration:
  - Parameters calibrated to match Jamaica’s macroeconomic ratios and disaster probability/average damages.
  - EM-DAT database: since 1960, 23 reported storms → annual probability around 0.35. Expected losses per storm event estimated at around 5 percent of GDP.
  - Key calibration input: share of public investment in GDP set at 3.5 percent of GDP.
- Scenario analysis (two scenarios):
  a) Baseline scenario, no policy change:
     - Authorities invest only in standard (non-resilient) infrastructure.
     - Model calibrated to generate annual capital destruction of around 5 percent of GDP and assumes no increased public investment (reconstruction) following the natural disaster.
  b) Resilient investment scenario:
     - Authorities install resilient public capital (80 percent of the total capital stock).
     - Cost of resilient investment assumed 25 percent more expensive than standard public investment.
     - Higher cost fully financed domestically by lump-sum taxes (without increases in public debt or contributions from international donors).
- Key results (long-run highlights):
  - Figure 1 (described): GDP response to a natural disaster (ND) that destroys around 5 percent of GDP of the capital stock:
    - Baseline: GDP reduces by between 1 to 1.5 percent on impact and gradually returns to steady state.
    - With resilient public capital (80 percent resilient): initial GDP level around 3.5 percent higher compared to baseline; in response to ND GDP drops by ¾ to 1 percent on impact and gradually returns to steady state.
  - Figure 2 (described): Public debt to GDP increases after ND in both scenarios, but increase is lower (by around 1 pp of GDP) when public investment is resilient due to smaller GDP decline.
- Modeling notes:
  - Private sector capital stock assumed non-resilient.
  - Use of lump-sum taxes for financing allows clean quantification of return; other fiscal instruments would incorporate multiplier effects.
  - Fiscal rule: lump-sum taxes respond to deviations of public debt to GDP ratio relative to steady state; feedback rule equal in both scenarios and assumes constant government spending as a share of GDP.

### Annex V — Climate Public Investment Management Assessment (C-PIMA)
- Climate exposure and vulnerabilities:
  - Jamaica highly exposed to tropical cyclones, floods, and droughts.
  - Jamaica ranks 47th out of 191 countries in the 2023 INFORM Risk Index.
  - Expected future climate changes: more heatwaves, more irregular rainfalls increasing drought/flood hazards, stronger tropical cyclones, and rising sea levels; infrastructure, population and tourism concentrated in coastal areas amplify costs.
- C-PIMA diagnostic findings:
  - Progress: development of a comprehensive climate change policy framework and planning for disaster risk financing.
  - Weaknesses:
    - Weak coordination across central government and municipal corporations; no institution positioned strategically to lead adaptation or mitigation investments.
    - Regulatory and oversight framework for public bodies does not promote consistency between climate-related investments and national climate policies, despite some public bodies being contributors to the Nationally Determined Contribution (NDC).
    - PPP framework lacks allocation of climate risks between government and PPP partners and lacks standardized climate-informed investment project appraisal and selection procedures.
    - Climate-oriented infrastructure spending is not tracked in the budget; ex-post reviews or external audits of projects’ climate outcomes are not conducted; climate impact not integrated into public asset management.
- C-PIMA high-priority recommendations (eight reform areas; priorities and related RMs):
  - Improve the climate informed medium-term fiscal and budget framework to guide budget preparation, high priority; RM1 (end-June 2023), RM5 (end-March 2024), RM6 (end-Dec. 2023).
  - Strengthen the climate change strategic guidance of planning for capital budgeting, medium priority.
  - Revise the framework for private and public bodies participation in climate smart infrastructure, medium/high priority; RM2 (end-March 2023).
  - Develop climate change project appraisal and selection methodologies and apply them consistently to all projects, regardless of financing source, high priority; RM3 (end-Dec. 2023), RM4 (end-Dec. 2023).
  - Enhance transparency on green and resilient investment projects in budget documentation, medium priority.
  - Introduce climate change arrangements for the ex-post evaluation of investment projects, medium priority.
  - Develop a climate smart asset register and ensure adequate funding for maintenance of assets, medium priority.
  - Ensure that the legal framework and staff capacity are supportive of climate change PIM reforms, medium/high priority.

*Source: The PPP Standard Operating Procedure Manual, 2023.*

### 4. We   continued to make progress with our structural reform agenda since the approval of the

### 1jamea2023004 - 4. We   continued to make progress with our structural reform agenda since the approval of the

### Structural reform progress since approval of PLL and RSF
- Following the approval of a law mandating establishment of an Independent Fiscal Commission (FC), its head was sworn in last March. The FC will assess the realism of fiscal plans and their consistency with the FRL.
- Reforms of the public compensation framework have been implemented within the fiscal envelope envisaged by the Fiscal Responsibility Law. It establishes a wage structure that is simple, fair, equitable, sustainable, affordable, and fit for the purpose of attracting talent and recognizing performance.
- Reforms in the financial sector to strengthen stability, sustainability, and crisis management continued, comprising: progressing adoption of Basel III regulation; risk-based supervision; expanding regulatory remit of the central bank; progress towards adoption of a special resolution regime; and implementation of recommendations arising from our National Risk Assessment published in August 2021 and the action plan agreed with FATF to exit from a list of jurisdictions under increased monitoring by FATF.

### Role of IMF arrangements (PLL and RSF)
- The Precautionary and Liquidity Line (PLL) arrangement provides valuable insurance against external shocks while bolstering investor confidence.
- The RSF is expected to help with catalyzing private financing and multilateral support for reforms aimed at reducing vulnerabilities to climate events and our ambitious climate agenda.
- The arrangements support implementation of reforms to shield policy frameworks from the potential impact of global shocks and structural reforms targeting remaining vulnerabilities.
- Outcomes of reforms supported by these arrangements will advance the pace of implementation of our public policy reforms for stronger, more inclusive growth and enhance macroeconomic resilience by reducing vulnerabilities of our balance of payments from climate-change related events.

### Use of RSF disbursements and financing framework
- We will use the RSF disbursements as budget support. It will substitute more expensive market financing improving debt dynamics and lowering overall financing cost.
- On April 18, we have signed the Memorandum of Understanding Regarding the Respective Responsibilities of MOFPS and BOJ in connection with the financing under the Resilience and Sustainability Facility from the International Monetary Fund to establish a framework on the modalities for the repayment of IMF financing and the servicing of interest and other charges.

### Commitments under PLL: integrity, supervision, and procurement
- Policies under the PLL will enhance: (i) financial integrity by addressing strategic vulnerabilities of our AML/CFT regime; (ii) financial supervision and regulation; and (iii) the data adequacy framework.
- Intention to continue improving regulations to the 2018 Procurement Act to enhance transparency, improve governance and limit vulnerability to corruption, including reforming regulations to require collection and publication on the Ministry of Finance website of beneficial ownership information of awarded companies.
- As a first step, published beneficial ownership information for companies awarded COVID-related contracts by public agencies.

### AML/CFT and beneficial ownership reforms and milestones
- Jamaica’s final Court of Appeal upheld our application and agreed that Attorneys-at-Law were subject to the Proceeds of Crime (POCA) legislation and its reporting requirements.
- At end-March, parliament approved amendments to the Companies Act: (i) making the definition of beneficial ownership consistent with FATF standards; (ii) introducing sanctions for breaching basic and beneficial ownership obligations; and (iii) granting the Registrar of Companies powers to ensure compliance.
- FSC has the RBS methodology and has started licensing and risk profiling of TCSPs ahead of the application deadline in April; licensing and risk profiling will inform subsequent onsite examinations.
- Current efforts concentrated on: (i) the implementation of the beneficial ownership provisions approved by parliament; (ii) making the beneficial ownership registry more comprehensive and effective; and (iii) advancing the RBS of the TCSPs and Attorneys-at Law.
- Passage and coming into force of the Companies Amendment Act (2023) on March 31 and April 1 respectively would mean Jamaica satisfies international standards for transparency and beneficial ownership of legal persons and arrangements; committed to implementing by September 2023 the aforementioned amendments and commencing implementation of the RBS framework for trust and corporate service providers and lawyers.

### Financial supervision, Basel III adoption, and regulatory perimeter expansion
- Phase I milestone: publication of the Standard of Sound Practice for Capital Adequacy (SSP), setting minimum capital requirements for credit, market, and operational risk components under Pillar 1 of Basel III and the revised definition of regulatory capital.
- Implementation of Pillars 2 and 3 and work to make the SSP into a capital adequacy regulation are ongoing.
- Phase II (Pillar 2) includes ICAAP, SREP, framework for designating D-SIFIs, and execution of quantitative impact studies (QIS) by licensed DTIs.
- Phase III involves Pillar 3 focusing on market disclosures, consultation and implementation of additional capital and liquidity measures—including capital buffers and the Net Stable Funding Ratio (NSFR).
- Amendment to the Co-operative Societies Act will bring credit union cooperatives under the regulatory perimeter of the Ministry of Finance and the BOJ; the bill will be presented to Parliament in 2023 jointly with the proposed Credit Unions (Special Provisions) Act, covering licensing, capital, reserves, prohibited business, and intervention processes—allowing the BOJ to monitor their operations.

### Planned regulatory and supervisory reforms (structural benchmarks and timelines)
- a. Special Resolution Regime (SRR): Technical Working Group preparing a draft law to establish administrative resolution powers for systemically important financial institutions and modify insolvency component for non-systemic financial institutions, in line with Fund staff recommendations (Structural Benchmark, end-March 2024).
- b. Publish methodology to identify systemically important (bank and non-bank) financial institutions (Structural Benchmark, end-September 2023).
- c. Advance supervision of financial holding companies; BOJ granted first FHC license in May 2021 and commenced a pilot monitoring exercise; has licensed one more FHC since then.
- d. Expand supervisory remit of the Financial Services Commission (FSC); FSC launched a risk-based supervision framework in November 2021 and is preparing an amendment to be tabled in Parliament to enhance consolidated supervision (Structural Benchmark, end-September 2023). This change facilitates progress towards a unified prudential regulatory structure to be implemented over the next 24 months.
- e. Implement a unified prudential regulatory structure under a twin-peaks model, with unified prudential supervision under the BOJ over time; FSC will continue to supervise the non-bank financial system in the short term and focus on market conduct and consumer protection when reform is complete.

### Data, statistics, and SDDS subscription plan
- Steady progress with national accounts and price statistics (including rebasing and updating national accounts methodology, and an updated Household Expenditure Survey), government finance statistics, monetary and financial statistics, and balance of payments—with support from CARTAC and Fund’s Statistics Department (STA).
- Participating in GDDS since 2003 and in 2017 implemented the enhanced General Data Dissemination System (e-GDDS).
- Plan to subscribe to the SDDS with PLL facilitating progress; IMF STA Special Data Dissemination Standard Assessment mission took place in May 1-12 and helped define an action plan to subscribe to the SDDS by mid-2025 (Structural Benchmark, end-March 2023).
- STATIN will present a restructuring plan to the MOFPS by end-November 2023 to facilitate implementation during FY2024/25.
- Three high-priority structural benchmarks proposed under the PLL:
  - (i) BOJ will compile and present to the Fund’s Statistics Department the International Reserve and Foreign Currency Liquidity (IRFCL) template data for August 2023 by end-September 2023;
  - (ii) MOFPS will disseminate on the National Summary Data Page (NSDP) the compiled data for general government operations for fiscal years 2021/22 and 2022/23 by end-March 2024;
  - (iii) BOJ will conduct the Non-Financial Corporation Survey to obtain data for Direct Investment Intercompany Lending positions for each quarter of 2023, which will improve external sector data by-end June 2024.
- Additional high-priority actions will be progressed, some extending beyond the program’s expiration date.

### RSF reforms and climate resilience agenda
- Jamaica is exposed to higher temperatures, sea level rise, and more frequent natural disasters: droughts, hurricanes, storms, and floods, increasing vulnerabilities to climate change.
- RSF is instrumental to implement reforms to strengthen resilience to climate change vulnerabilities and integrate this agenda into macroeconomic policy formulation; concessional resources and RSF reforms play a fundamental role in catalyzing private sector financing.
- Climate agenda includes: transition to renewables in electricity generation, enhancement of policy frameworks to scale up infrastructure investment and catalyze private financing, reforms to strengthen financial resilience and “green” the financial system including sound monitoring throughout the economy’s transition.

### RSF three pillars and specific measures and timelines
- Pillar 1 (adaptation; reforms to be completed between March 2023 and March 2024):
  - For first review: (i) reformed PPP policy to include climate requirements from project identification to contract management and revise the PPP Standard Operating Procedure Manual to include these requirements; and (ii) adopted a National Natural Disaster Risk Financing (DRF) policy.
  - For remainder of program: (iii) adopt methodologies to conduct climate risks assessments at project appraisal stage and incorporate methodology in the Public Investment Management System (PIMS) handbook; (iv) define and publish project selection criteria including climate change criteria; (v) conduct and publish in the Fiscal Risk Statement quantitative analysis of the fiscal risks generated by climate change; and (vi) establish a National Natural Disaster Reserve Fund (NDRF) and financial regulations for transparent administration and reporting of the NDRF.
- Pillar 2 (mitigation; reforms to be completed between June 2023 and June 2024):
  - Aim to convert about half of total electricity generation capacity to renewables by 2030.
  - For first review: (i) adopted and submitted to parliament for information an electric vehicle policy setting functional standards and regulations for electric mobility, defining energy sector guidelines for electric mobility accommodation, developing operational codes to promote adoption of electric vehicles, and setting guidelines for development of an electric mobility ecosystem; and (ii) approved guidelines adapted to the type and purpose of structures to reduce energy use in existing and newly constructed public buildings.
  - For remainder of program: submit to parliament a bill to incentivize investment in renewables through fiscal measures.
- Pillar 3 (green finance; measures to be completed between December 2023 and June 2024):
  - (i) publish a climate risks assessment with diagnostic of climate and environmental risks and define a timeline to embed these risks in supervisory activities and related databases for development of climate risks assessments;
  - (ii) adopt a monitoring framework and reporting requirements for financial institutions to implement Climate Related Financial Risks stress testing and for the BOJ to integrate climate risks in supervision and macroprudential policy formulation;
  - (iii) establish an institutional framework for green-bond issuance and trading to open new avenues for private climate related financing.

### Complementarity, implementation, and monitoring
- The RSF agenda and the Updated NDC complement and support each other; lessons learned will be shared across responsible institutions to improve efficiency, timeliness, and accuracy of ongoing and future climate resilience work.
- Jamaica intends to continue reforms beyond the RSF completion, viewing RSF as propelling forward the endeavor to make Jamaica safe, secure and thriving.
- As a member of the IMF, Jamaica will present relevant information on economic and policy developments ahead of semi-annual reviews expected to be completed no later than August 31, 2023, February 29, 2024, and August 31, 2024.
- Jamaica will observe standard performance criteria on trade and exchange restrictions, bilateral payment agreements, multiple currency practices and the non-accumulation of payment arrears on the external debt, and provide the Fund with needed information to monitor the program under the PLL and the RSF arrangements.

### Program stance, targets, and outlook
- Policies contained in this communication are considered adequate for achieving economic goals supported by the PLL and the RSF arrangements; Jamaica is committed to taking additional measures that may be necessary.
- New end-September and end-March fiscal and international reserves indicative targets agreed to account for seasonal patterns in fiscal outcomes and reflect the strong reserve accumulation over the last year—Table 1 is modified to reflect this.
- Jamaica reiterates commitment to targets in the PLL; IMF technical support with adoption of these measures would be appreciated.
- The continued strengthening of the economy’s resilience should position Jamaica well for achieving program objectives in the short- and medium-term.
- Jamaica continues to treat the PLL as precautionary. The risks that could trigger the drawings are likely to dissipate in the next 18 months.
- Jamaica is expected to be in a strong position to exit the PLL by end-2024 as external risks subside, and external buffers continue to grow.

*Source: 1jamea2023004 (excerpt).*

### 23.  On behalf of the Government of Jamaica, we extend our gratitude for the continued

### 23.  On behalf of the Government of Jamaica, we extend our gratitude for the continued support we have received from the Fund toward the success of our economic policies in the current global environment.

### Authorization and Closing
- The Government authorizes the IMF to publish this statement, its attachments, and the staff report for this review in line with the commitment to transparency.
- Signatories:
  - /s/ Nigel Clarke, DPhil., MP — Minister of Finance and the Public Service
  - /s/ Richard Owen Byles — Governor, Bank of Jamaica

### PLL Quantitative Targets (Table 1)
- Indicative Targets (selected dates and values as presented):
  - Overall Fiscal Balance of the Central Government (floor)1/
    - Target At Program Approval: J$7,506 million
    - Adjusted Target: J$7,506 million
    - Actual Proposed Revised Target (March 31, 2023): J$7,786 million
    - Proposed Target (Sept. 30, 2023): J$3,625 million
    - Proposed Target (March 31, 2024): J$-45,083 million
    - Proposed Target (final column): J$8,249 million
  - Net International Reserves (floor)
    - Target At Program Approval: US$3,535 million
    - Adjusted Target: US$3,535 million
    - Actual Proposed Revised Target (March 31, 2023): US$4,147 million
    - Proposed Target (Sept. 30, 2023): US$3,620 million
    - Proposed Target (March 31, 2024): US$3,820 million
    - Proposed Target (final column): US$3,930 million
- Source: IMF staff estimates.
- Note: 1/ Cumulative flows since the beginning of the fiscal year. Fiscal year runs from April 1 to March 31.

### PLL Structural Benchmarks (Table 2)
- Data Adequacy
  - A. Cabinet to establish a National Statistical Committee (BOJ, MFPS, STATIN) to approve an Action Plan to Subscribe to the SDDS; monitor and make recommendations. Timing: March 31, 2023. Status: Met.
  - B. BOJ to compile and submit IRFCL template data for August 2023 to the Fund’s Statistics Department. Timing: September 30, 2023. Status: On track.
  - C. MOFPS to compile and disseminate on the NSDP General Government data for fiscal years 2021/22 and 2022/23. Timing: March 31, 2024. Status: On track.
  - D. BOJ to conduct the NFC survey to obtain data for Direct Investment Intercompany Lending positions for each quarter of 2023. Timing: June 30, 2024. Status: On track.
  - Note: Measures B, C, and D under Data Adequacy are proposed as new SBs.
- Financial Regulation
  - A. Submit Special Resolution Regime law to parliament to strengthen resolution of non-viable financial institutions, in line with Fund staff recommendations. Timing: March 31, 2024. Status: On track.
  - B. Publish a BOJ consultation paper methodology to identify systemically important (bank and non-bank) financial institutions. Timing: September 30, 2023. Status: On track.
  - C. Submit to parliament amendments to establish supervision by the Financial Services Commission of financial conglomerates without a deposit taking institution. Timing: September 30, 2023. Status: On track.
- Financial Integrity
  - A. Submit to Parliament an amended Companies Act to: (i) amend definition of beneficial ownership in line with FATF standards; (ii) create effective, proportionate, and dissuasive sanctions for legal persons and legal arrangements that breach BO obligations; and (iii) grant the Registrar of Companies powers to ensure compliance, monitor and verify basic and BO information. Timing: March 31, 2023. Status: Met.

### Reform Measures Under the RSF (Table 3)
- Pillar 1: Building Fiscal and Physical Resilience to Natural Disasters and Climate Change
  - RM1: MOFPS to adopt a National Natural Disaster Risk Financing (DRF) policy. Target: 1st PLL Review (End-June 2023). Status: Met. TA: World Bank.
  - RM2: Development Bank of Jamaica with MOFPS to modify PPP Policy and Institutional Framework to include climate requirements and revise PPP SOP Manual. Target: 1st PLL Review (End-March 2023). Status: Met. TA: IDB.
  - RM3: PIAB to define methodology to conduct climate impact assessments at project appraisal stage and incorporate in PIMS handbook. Target: 2nd PLL Review (End-Dec. 2023). Status: On track. TA: IDB.
  - RM4: PIOJ to define and publish project selection criteria including climate change criteria. Target: 2nd PLL Review (End-Dec. 2023). Status: On track. TA: IDB.
  - RM5: MOFPS to conduct and publish in the Fiscal Risk Statement quantitative analysis of fiscal risks generated by climate change. Target: 3rd PLL Review (End-March 2024). Status: On track. TA: IMF.
  - RM6: MOFPS to submit to parliament an amendment to the Financial Administration and Audit Act to establish a National Natural Disaster Reserve Fund (NDRF) subaccount under the consolidated fund account and approve financial regulations for transparent administration and reporting. Target: 2nd PLL Review (End-Dec. 2023). Status: On track. TA: World Bank.
- Pillar 2: Strengthening Mitigation/Promoting Renewables
  - RM7: MOFPS to submit to parliament a bill to incentivize investment in renewables through fiscal measures. Target: 3rd PLL Review (End-June 2024). Status: On track.
  - RM8: MSET to submit to parliament the electric vehicle policy, in line with objectives in paragraph 23 of the Written Communication. Target: 1st PLL Review (End-June 2023). Status: Met. TA: IDB.
  - RM9: MSET to approve guidelines to reduce energy use in schools, hospitals, and public buildings for existing and new structures. Target: 1st PLL Review (End-June 2023). Status: Met. TA: IDB.
- Pillar 3: Greening the Financial Sector
  - RM10: BOJ to publish a climate risks assessment (including diagnostic of related climate and environmental risks and governance/regulatory regime) and define timeline to embed these risks in supervisory activities and related databases. Target: 2nd PLL Review (End-Dec. 2023). Status: On track. TA: French Dev. Agency.
  - RM11: Adopt a monitoring framework to improve data collection and establish reporting requirements for financial institutions to implement Climate Related Financial Risks stress testing and for BOJ to integrate climate risks in supervision and macroprudential policy formulation. Target: 3rd PLL Review (End-June 2024). Status: On track.
  - RM12: Establish an institutional framework for green-bond issuance and trading. Target: 3rd PLL Review (End-June 2024). Status: On track. TA: World Bank/Green Climate Fund.
- Note: The reform measures have been discussed with IDB and World Bank experts to deepen synergies.

### Technical Appendix — Monitoring and Definitions (Attachment I)
- Indicative targets for remaining PLL reviews: end-September 2023 (2nd review) and end-March 2024 (3rd review).
- Cumulative Floor of the Central Government Fiscal Balance
  - Definition: Total revenues minus total expenditures covering government activities as specified in the budget. Revenues recorded when funds transferred to a government revenue account; include grants. Capital revenues exclude revenues from divestment operations.
  - Expenditures: Recorded on a cash basis; include compensation payments, other recurrent expenditures, capital spending; government-funded PPPs treated as traditional public procurements; transfers to other public bodies not self-financed included.
  - Treatment: Costs under existing contracts or severance payments allocated to current and capital expenditures accordingly. Expenditures settled directly with bonds (except provision for losses of the BOJ) or other non-cash liability recorded as expenditure financed with debt issuance and affect overall fiscal balance.
  - Reporting: Data provided not later than six weeks after the test date.
- Central Government and Public Sector definitions
  - Central government: Institutions covered under the state budget; includes public bodies financed through the Consolidated Fund. Fiscal year: April 1 to March 31.
  - Public Sector: “Specified Public Sector” (SPS) under the Fiscal Responsibility Law (FRL): central government and self-financed public bodies not deemed “commercial” by the OAG; excludes the BOJ.
  - Listed self-financed public bodies included in monitoring (full list preserved in source).
- Floor on the Stock of Net International Reserves of the BOJ (NIR-BOJ)
  - Definition: U.S. dollar value of gross foreign assets of the BOJ minus gross foreign liabilities.
  - Gross foreign assets: Defined per BPM6 as readily available claims on nonresidents in foreign convertible currencies; include BOJ holdings of monetary gold, SDR holdings, foreign currency cash, foreign currency securities, liquid balances abroad, and reserve position at the Fund.
  - Exclusions from reserve assets: Assets pledged, collateralized, or encumbered; claims on residents; claims in foreign exchange arising from derivatives vis-à-vis domestic currency; precious metals other than gold; assets in nonconvertible currencies; illiquid assets.
  - Gross foreign liabilities: All foreign exchange liabilities to nonresidents including commitments to sell foreign exchange from derivatives and credit outstanding from the Fund, excluding credit transferred by the Fund into a Treasury account to meet government financing needs directly.
  - In deriving NIR: Credit outstanding from the Fund is subtracted from foreign assets of the BOJ. GOJ foreign liabilities are excluded from gross foreign liabilities of the BOJ.
  - Conversion: Non-U.S. dollar denominated foreign assets and liabilities converted into U.S. dollar at the arrangement exchange rates except for items affecting government fiscal balances, which will be measured at current exchange rates.
  - Arrangement exchange rates (average daily selling rate of December 14, 2022):
    - 1 USD = 154.2889 JMD
    - 1 SDR = 205.8055 JMD
    - 1 EUR = 165.3159 JMD
    - 1 CAD = 112.8969 JMD
    - 1 GBP = 188.7903 JMD
    - 1 CHF = 166.5378 JMD
    - 1 CNY = 22.2002 JMD
- Adjusters to NIR targets
  - NIR targets adjusted upward (downward) by surplus (shortfall) in expected loan disbursements from multilateral institutions (IBRD, IDB and CDB) and commercial loans guaranteed by multilateral sources relative to baseline projection.
  - Loan disbursements defined as external loan disbursements (excluding project financing disbursements) from official creditors usable for public sector financing.
  - NIR targets adjusted upward (downward) by surplus (shortfall) in grants or loan disbursements to the central government that are purchased by or deposited at the BOJ relative to baseline projection.
- Baseline Projection: External Disbursements (Tables)
  - Table 2a. Cumulative flow from Dec 31, 2022 (in US$ million) — End-September 2023
    - Budget Support Grants: 1.72
    - Multilateral Loans: 0.00
    - Loans Guaranteed by Multilaterals: 0.00
  - Table 2b. Cumulative flow from Dec 31, 2023 (in US$ million) — End-March 2024
    - Budget Support Grants: 4.13
    - Multilateral Loans: 0.00
    - Loans Guaranteed by Multilaterals: 0.00
- Reporting and Payment Policies
  - Reporting: BOJ to provide NIR data to the Fund with a lag of no more than 10 days after the test date.
  - Government payment policy: All external obligations to be met on time and with no delays; policy has been to pay domestic obligations on time, including commercial loans, treasury bills, notes, and bonds.
  - Definition of payment arrears for the arrangement: External debt service obligations (principal and interest) not paid at the time they are due as specified in contractual agreements on central government and central government guaranteed debt. Overdue debt and debt-service obligations that are in dispute will not be considered external payment arrears.
- Timing of reviews
  - The arrangement was approved by the IMF Executive Board on March 1, (text ends in source).

*Source: IMF staff estimates and Jamaica Written Communication and Technical Appendix as provided in the content unit.*

### 2023. The reviews are expected to be completed by no later than August 31, 2023, for the first

### Statement by Philip Jennings, Executive Director for Jamaica and Rose Cunningham, Senior Advisor to Executive Director — August 31, 2023

### Overview
- Reviews under the Precautionary Liquidity Line (PLL) and Resilience and Sustainability Facility (RSF) are expected to be completed by no later than August 31, 2023 (first review), February 29, 2024 (second review), and August 31, 2024 (third review).
- Jamaican authorities have met all requirements for the first reviews of the PLL and RSF arrangements and are on track to meet requirements for upcoming reviews.
- Authorities intend to treat the PLL arrangement as precautionary and expect to be in a strong position to exit the PLL by end-2024.

### Economic developments and outlook
- Growth and labor:
  - Economy expanded at a pace of 4.7 percent in FY 2022/23 (staff growth forecast at program approval was 3.5 percent).
  - Staff and authorities expect growth to slow over 2023 to be more in line with potential output growth.
  - Unemployment rate dropped to a record low of 4.5 percent in April, concurrent with an expansion in the labor force and notable increases in female labor force participation.
  - Domestic labor market described as very tight with anecdotal wage adjustments in selected industries.
- Inflation and monetary policy:
  - Core inflation in July stood at 5.2 percent (down from a peak of 8.2 percent in 2022).
  - Headline inflation in July was 6.6 percent (from a peak of nearly 12 percent in 2022).
  - Bank of Jamaica policy rate was increased by 650 basis points to 7 percent from October 2021 to November 2022.
  - Central bank target range for inflation is 4 to 6 percent; staff and authorities expect inflation to be within this range by the end of 2023.
  - Recent uptick in headline inflation since May primarily due to agriculture price increases; stance remains vigilant and data dependent.
- External position and vulnerabilities:
  - Current account was close to balance in FY2022/23; CA deficits have averaged less than 3 percent of GDP over the past 5 years.
  - Net international reserves were well above the PLL indicative target for March 31, 2023.
  - Private capital flows are strong; external debt projected to decline; government has good access to international debt markets.
  - Key downside risks: tighter global financial conditions, worsening terms of trade (e.g., higher energy prices), and climate-related events and natural disasters.

### Precautionary Liquidity Line (PLL)
- Qualification and targets:
  - All indicative targets and structural benchmarks for the first PLL review have been met; staff assesses Jamaica continues to qualify for the PLL arrangement.
  - Authorities expect to exit the PLL by end-2024 when external risks are expected to subside.
- Fiscal outcomes and debt:
  - Fiscal performance somewhat exceeded the PLL indicative target for March 31, 2023.
  - Strong recovery and prudent fiscal policy led to large fiscal surpluses and a sharp drop of about 30 percentage points in Jamaica’s debt to GDP ratio, which reached about 80 percent.
  - Staff project public debt as a share of GDP will decline further to reach the target of 60 percent by FY2027/28, consistent with the Fiscal Rule.
  - Costs of public sector wage compensation reform were front-loaded into FY2022/23; overall fiscal performance better than expected due to strong tax revenue inflows.
  - Indicative targets for upcoming PLL reviews updated to reflect seasonality in mid-year fiscal flows for September; full FY policy stance remains the same.
  - Staff continues to assess that Jamaica’s debt is sustainable with high probability and that Jamaica has adequate capacity to repay the Fund.
- Financial integrity, AML/CFT, and supervision:
  - In March, legislation was approved to amend the Companies Act to: (i) make the definition of beneficial ownership consistent with FATF standards; (ii) introduce sanctions for breaching basic and beneficial ownership obligations; and (iii) grant the Registrar of Companies powers to ensure compliance — meeting the PLL structural benchmark on financial integrity due for the first review.
  - February constitutional challenge resolved by the Judicial Committee of the Privy Council supporting that Attorneys-at-Law are subject to the Proceeds of Crime Act (POCA) and its reporting requirements.
  - Jamaica must now demonstrate effective application of its AML/CFT regime to complete the FATF action plan; implementation focuses on:
    - Demonstrating that the legal profession is subject to effective, risk-based AML/CFT supervision.
    - Demonstrating that trust and service company providers (TSCP) are subject to effective, risk-based AML/CFT supervision, including progress on licensing and risk rating, enforcement strategy, and onsite/offsite supervision.
    - Demonstrating that effective, proportionate and dissuasive sanctions are applied against delinquent companies where appropriate, and that mechanisms provide timely access to beneficial ownership information for competent authorities.
  - Authorities are conducting outreach, licensing, risk-profiling, supervision and enforcement activities and have commenced sanctions against some delinquent companies under the new Companies Act sections.
- Financial sector regulation and resolution:
  - Progress in adopting Basel III regulations, risk-based supervision, and expansion of the regulatory perimeter to include credit unions.
  - Framework published for identifying Domestic Systemically Important Financial Institutions (D-SIFIs).
  - Legislative amendments to strengthen risk-based supervision of financial conglomerates that are not DTIs expected for the next PLL review deadline in September.
  - Work advancing on a regime to resolve non-viable financial institutions, aligned with a PLL structural benchmark due in March 2024.
  - Government has begun building capacity and preparing legislative ground to adopt a “twin peaks” model of unified prudential supervision (banks and non-bank financial institutions overseen by the Bank of Jamaica); implementation expected to be completed over the next two years.
- Data quality:
  - Government established a National Statistical Committee in March, meeting the first PLL structural benchmark on data quality.
  - IMF technical assistance in May helped identify gaps and inform a roadmap for Jamaica to subscribe to the IMF’s SDDS.
  - Authorities committed to completing the process and agreed to three additional structural benchmarks under the PLL on data adequacy.
- Reserves:
  - Staff and authorities agreed to an upward revision to the indicative target for reserves for September.

### Resilience and Sustainability Facility (RSF)
- Reform measures and implementation:
  - Staff and authorities agreed on 12 reform measures under the RSF.
  - Authorities completed 4 of these by the end of June, as required for the first RSF review.
  - Two completed reforms were policy changes:
    - Adoption of a National Natural Disaster Risk Financing (DRF) policy for a more strategic approach to disaster risk financing.
    - Revision of the Public Private Partnership (PPP) policy to include climate requirements from project identification to contract management; PPP Standard Operating Procedure Manual also revised to include these requirements.
  - Two other completed measures support increased use of renewable energy:
    - Legislation establishing an electric vehicle policy passed.
    - Guidelines approved on increasing energy efficiency in public buildings.
  - Remaining RSF reform measures include fiscal incentives to invest in renewables and other measures to catalyze climate-related investment.
- Climate finance mobilization:
  - In June, the IMF and its Climate Finance Task Force led a high-level roundtable with IFIs, development partners and private sector participants to discuss opportunities to scale up climate financing to support Jamaica’s climate-related goals.

### Concluding remarks
- First reviews under the PLL and RSF demonstrate Jamaica’s continued progress on macroeconomic and climate reforms with Fund support.
- Authorities appreciate effective engagement with Fund staff, the World Bank, IDB, and other stakeholders, and look forward to continued collaboration to implement remaining program commitments to help achieve sustainable, equitable, and resilient growth.

*Statement by Philip Jennings, Executive Director for Jamaica and Rose Cunningham, Senior Advisor to Executive Director — August 31, 2023*

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_Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1jamea2023004.pdf_