## 1jamea2024002-print-pdf ## Source details **Canonical URL:** [1jamea2024002-print-pdf](https://www.imf.org/-/media/files/publications/cr/2024/english/1jamea2024002-print-pdf.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2024/english/1jamea2024002-print-pdf.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2024/english/1jamea2024002-print-pdf.pdf.json) --- ### Executive summary — context, PLL, RSF, and recent developments - Context: - Jamaica responded to recent global shocks prudently under strong policy frameworks. - Policies supported the economy while reducing public debt and inflation. - Outlook remains positive but exposed to risks from global growth deceleration, tighter global financial conditions, commodity price volatility, and natural disasters. - Precautionary and Liquidity Line (PLL): - Staff recommends completion of the Third PLL Review as all structural benchmarks and the quantitative indicative target (IT) for net international reserves (NIR) have been met. - The IT for the fiscal balance was marginally missed—while still in surplus—with a negligible impact on the debt consolidation path and FRL’s targets unchanged. - Jamaica continues to meet PLL qualification criteria and authorities intend to treat the PLL as precautionary. - Under the PLL: - Net international reserves reached US$ 5.14 billion by end-March 2024, above the IT of US $4.40 billion. - The end-March 2024 overall fiscal surplus of the central government was J$ 1.172 billion, below the IT of J$ 8.249 billion (a difference of about 0.2 percent of GDP). - MOFPS disseminated General Government data for FY2019/20–2022/23 on the National Summary Data Page (NSDP). - BOJ conducted the Non-Financial Corporations (NFC) survey for Direct Investment Intercompany Lending positions for each quarter of 2023. - Special Resolution Regime law submitted to parliament to strengthen resolution of non-viable financial institutions. - Resilience and Sustainability Facility (RSF): - Authorities completed all reform measures for the third review, allowing disbursements of SDR191.45 million (50 percent of quota) under the RSF. - RSF-supported reforms completed include: - MOFPS published quantitative analysis of fiscal risks generated by climate change in the Fiscal Risk Statement. - MOFPS submitted a bill to incentivize investment in renewables through fiscal measures; the bill was passed by parliament on July 9, 2024. - BOJ adopted a monitoring framework improving data collection and reporting requirements for financial institutions. - Authorities established a framework for green-bond issuance and trading. - RSF objectives: accelerate transition to renewables; increase resilience to climate change; enhance climate focus in fiscal frameworks; strengthen climate risk management by financial institutions; catalyze climate financing. - RSF reforms were timely for the response to hurricane Beryl, strengthening natural disaster risk financing and climate-related fiscal risk assessment. - Recent macro-financial developments: - Growth and labor market: - GDP estimated to have grown 2 percent in FY2023/24 (slightly above potential). - Tourism above pre-pandemic levels; mining rebounded after 2021 alumina plant outage. - Unemployment fell to a record-low of 4.2 percent in October 2023. - FY2024/25 growth projected at around 1.7 percent. - Inflation: - Returned to BOJ’s target band of 4-6 percent. - End-May 2024 headline and core inflation at 5.2 and 5.7 percent respectively. - External sector: - Current account estimated surplus slightly above 2 percent of GDP in FY2023/24. - FDI rising but below historical averages. - International reserves at end-March 2024 about US$5.2 billion, highest in Jamaica’s history. - Public finances: - Public debt-to-GDP ratio 73 percent of GDP, nearly 40 percentage points below COVID peak. - FY2023/24 budget recorded a small overall surplus and a primary surplus of about 5.7 percent of GDP. - Execution of capital expenditures below budgeted amount. - March CIT shortfall determinants: higher-than-expected accumulation of arrears and lower insurance sector profits due to IFRS17. - Financial sector: - Banks’ capital adequacy ratio 14.6 percent at end-2023. - End-April NPLs about 2 ½ percent and past due loans about 3½ percent of total loans. - Banks hold high-quality liquid assets at four times the regulatory minimum. - BOJ stress tests show resilience to higher bond yields and deterioration in loan quality. - Natural disaster: - Hurricane Beryl (July 3) caused heavy rains, life-threatening winds, flash flooding, mudslides, infrastructure and agricultural damage in the southwestern region, and loss of power and telecommunication services for about two-thirds of the population. - Authorities called for evacuation and opened shelters; damage evaluation and recovery efforts begun. - Beryl creates temporary downside risks to growth and upside risks to inflation. ### Outlook, projections, and risks - Medium-term projections (percent of GDP unless specified; consumer price inflation e.o.p.; gross reserves in US$million): - GDP growth: 2023/24 Est. 1.9; 2024/25 Proj. 1.7; 2025/26 Proj. 1.7; 2026/27 Proj. 1.6; 2027/28 Proj. 1.6; 2028/29 Proj. 1.6. - Consumer price inflation (e.o.p.): 2023/24 Est. 5.6; 2024/25 Proj. 5.0; 2025/26 Proj. 5.0; 2026/27 Proj. 5.0; 2027/28 Proj. 5.0; 2028/29 Proj. 5.0. - Consolidated public sector debt: 2023/24 Est. 73.3; 2024/25 Proj. 67.8; 2025/26 Proj. 64.7; 2026/27 Proj. 61.9; 2027/28 Proj. 58.9; 2028/29 Proj. 55.9. - Current account: 2023/24 Est. 2.4; 2024/25 Proj. 1.0; 2025/26 Proj. 0.1; 2026/27 Proj. -0.8; 2027/28 Proj. -1.7; 2028/29 Proj. -2.0. - Foreign direct investment: 2023/24 Est. 2.1; 2024/25 Proj. 2.4; 2025/26 Proj. 2.8; 2026/27 Proj. 2.8; 2027/28 Proj. 2.9; 2028/29 Proj. 2.9. - Gross reserves (US$million): 2023/24 Est. 5,232; 2024/25 Proj. 5,400; 2025/26 Proj. 5,500; 2026/27 Proj. 5,550; 2027/28 Proj. 5,600; 2028/29 Proj. 5,650. - Outlook summary: - Growth expected to converge to potential; inflation to return close to mid-point of target band in 2024 amid moderating energy prices and transport fares. - Current account expected to converge to a deficit of about 2 percent of GDP over the medium term as climate-related projects increase imports. - FDI expected to recover to about 3 percent of GDP over the medium term. - Debt expected to fall below 60 percent of GDP by FY2027/28, guided by the Medium-Term Fiscal Framework (MTFF). - Downside risks: - Tighter-than-expected global financial conditions. - Lower global growth affecting tourism and remittances. - Intensification of geopolitical conflicts increasing global commodity prices. - Natural disasters posing risks to activity, public debt, and financial stability. ### Performance under arrangements and program monitoring - Performance summary: - All PLL structural benchmarks and IT on net international reserves met; IT on fiscal balance marginally missed. - Authorities assessing reasons behind revenue shortfall and committed to offset spending cuts—if weaker-than-expected tax collection factors are not assessed as temporary by middle of FY2024/25—to attain legislated surplus of 0.3 percent of GDP. - Program implications: - Meeting NIR IT and RSF reform measures supports staff recommendation to complete third reviews under PLL and RSF. - PLL schedule and RSF access: - PLL approved March 1, 2023: 459.48 millions SDR, cumulative 120 percent of quota, cumulative 63 percent of total access. - Second review (Feb. 29, 2024): cumulative 727.51 millions SDR, 190 percent of quota, 100 percent of total access. - Third review (Aug. 31, 2024) based on March 31, 2024 quantitative targets: cumulative 727.51 millions SDR, 190 percent of quota, 100 percent of total access. - Total RSF access: 574.35 millions SDR (150 percent of quota). - External financing and GIR: - Gross Financing Needs (FY 2023/24 baseline, 3rd Review): 2,277 (US$ millions). - Gross Financing Needs (FY 2024/25 baseline): 3,293 (US$ millions). - Gross international reserves used in memorandum: FY 2023/24 baseline 5,232 (US$ millions); FY 2024/25 baseline 4,100 (US$ millions). - RSF disbursement listed as 513 (US$ millions) in one scenario and 256 (US$ millions) in another within program projections. ### Policies under the arrangements — macroeconomic, institutional, and financial - A. Macroeconomic policies: - FY2024/25 budget aims: - Primary surplus target of 5.6 percent of GDP to lower public debt to 68 percent of GDP by end of fiscal year. - Capital expenditure projected at 2.4 percent of GDP to finance climate resilience projects. - Performance provisions in public employee compensation to incentivize efficiency gains and improvements in education and health care. - Contingency planning and financing for hurricane response: - Use of the Contingencies Fund, CCRIF, and Contingent Credit Facility through the IDB. - Likely adjustments to current expenditure while keeping fiscal balance target unchanged. - Monetary policy: - BOJ held rates at 7 percent since November 2022. - BOJ maintained policy rate at 7 percent in June while starting gradual reduction of liquidity absorption operations. - Data-dependent approach to return inflation to mid-point of target band; patience warranted given strong cyclical position. - Macroeconomic resilience: - Public debt assessed sustainable with high probability (Annex II). - Insurance and contingency instruments: Contingencies Fund, National Natural Disaster Risk Fund, CCRIF, Contingent Credit Facility with IDB, and a catastrophe bond (CAT) (CAT not triggered with Beryl). - Record-high international reserves and recent sovereign credit rating upgrades with low sovereign spreads. - B. Strengthening institutions: - Fiscal policy framework enhancements: - Fiscal Commission to be operational in FY2024/25 to assess macroeconomic and fiscal forecasts, budget consistency with fiscal rules, and debt sustainability. - Procurement and Public Finance Management reforms following Electronic Procurement System (August 2023), including pre-engagement checklists, guidance notes for procurement committees, revised bid evaluation methods, and revised thresholds for single source procurement. - Development of a Public Investment Management Information System (PIMIS) to enhance public investment efficiency. - Staff encourages swift publication of beneficial ownership of companies awarded public contracts on the MOFPS website. - Revenue administration: - New Customs Bill—to be approved this FY—will foster revenue mobilization. - Authorities improving management of tax arrears with support from Canada Revenue Agency. - Financial sector and safeguards: - Public debt management and liability operations: - Government issued first ever local currency denominated global bond for US$300 million in November to pay down dollar-denominated debt due in 2025 and 2028. - Authorities will continue opportunistic liability management to reduce financing costs and risks while developing local currency bond markets. - Safeguards and BOJ autonomy: - 2023 Safeguards Assessment found broadly strong framework; progress in strengthened external audit selection and rotation arrangements. - Remaining scope: capacity in risk management and coverage of internal audit, especially co-sourced IT audits. - Legal amendments to BOJ Act strengthened autonomy and mandate; further enhancements underway to adopt a “twin peaks” supervisory regime. - Financial oversight and AML/CFT: - Basel III adoption progressing: regulatory capital reporting has used both pre-Basel III and Basel III requirements; legislative process underway to put in place Capital Conservation Buffer and Systemic Risk Buffer under Pillar 1. - Implementation of Pillar 2 proceeding (ICAAP, SREP, D-SIFI framework); Pillar 3 scheduled for 2026 to focus on market disclosures and additional capital and liquidity requirements including NSFR. - BOJ to become sole prudential regulator in 2026; BOJ licensed five out of eight financial conglomerates—remaining three to be licensed by end-2024. - Amendments to Financial Services Act submitted to parliament to place supervision of financial conglomerates without deposit-taking institutions under FSC. - Special Resolution Regime Bill submitted to parliament to mitigate failing institution risks and establish resolution arrangements. - AML/CFT progress: completed 13-action plan addressing 2017 Mutual Evaluation Report vulnerabilities; on-site FATF assessment verified implementation; Jamaica exited FATF increased monitoring in June; continue improvements for fifth round Mutual Evaluation Process (scheduled for June 2026). - Climate-related supervisory enhancements: - BOJ developed strategy to manage climate-related financial risks focused on supervisory capacity, integrating climate risks into macroprudential supervision, and operationalizing stress testing; first stage completed under RSF. ### RSF climate policies, measures, and fiscal impact - RSF-supported reform measures cover three pillars: resilience to natural disaster and climate change; greening the financial sector; mitigation. - Resilience: - RM1: Disaster risk financing policy adopted. - RM6: National Natural Disaster Fund established. - RM2: Revised PPP policy framework to include climate requirements. - RM3: Methodology to conduct climate impact assessment at project appraisal adopted. - RM4: Project selection criteria including climate change criteria codified. - RM5: Climate risks integrated into fiscal planning with quantitative appraisals under different scenarios. - Greening financial sector: - RM10: BOJ assessed climate risks and set timeline to incorporate them into supervisory activities. - RM11: Monitoring framework to improve data collection and establish reporting requirements for climate-related stress testing. - RM12: Framework for green bond issuance established. - Mitigation: - RM8: New electric vehicles (EV) policy. - RM9: Energy efficiency guidelines for public buildings. - RM7: New personal income tax rebates to incentivize solar panels; bill passed July 9, 2024 (rebates apply to panels acquired and installed on or after January 1, 2023). - Existing incentives: zero-rated VAT for inputs/raw materials for manufacture of solar and wind equipment; lower import tariffs for renewable energy items and EVs; license fee exemptions for EVs; net billing. - June amendment tabled reducing corporate income tax rate from 33 1⁄3 to 25 percent for independent power producers generating at least three-quarter of power from renewable sources. - RSF fiscal impact and savings: - RSF disbursements to the budget augment fiscal space and substitute more expensive market financing with cumulative estimated savings of 0.4 percent of GDP through FY2027/28. - Mitigation measures’ savings (e.g., efficiency guidelines) will accrue gradually as impacts materialize. - RSF reforms expected to enhance resilience to natural disasters and catalyze climate financing through IMF Climate Finance Task Force coordination and development partner engagement. - Authorities discussing modalities for a Blue Green Facility; working with IDB to operationalize a Project Preparation Facility and set up a Climate Finance Unit at MOFPS. - Caribbean Community Resilience Fund launched operations in Jamaica to attract private investors in renewable energy, blue economy, and climate-smart agriculture. - Initiatives to foster renewable investments: - Government selected two bidders (out of 12 proposals) to generate 100MW (about 10 percent of existing capacity) renewable energy; successful bidders to enter 20-year power purchase agreements with public electric utility. - Plans to double number of EV charging stations. ### Data adequacy, SDDS subscription, and statistics strengthening - Authorities pursuing comprehensive action plan to improve data. - 2023 SDDS assessment mission by Fund’s Statistics Department agreed action plan to allow Jamaica’s subscription to SDDS by mid-2025. - National statistics agency restructuring to attract qualified staff, close capacity gaps, and improve data management systems. - Under PLL, key data gaps closed toward SDDS subscription: - i) compilation and dissemination of General Government Operations data; - ii) improvement of coverage and timeliness of external sector statistics. - BOJ submits International Reserve and Foreign Currency Liquidity template data and conducted NFC survey for 2023 quarters. - MOFPS compiled and disseminated General Government data for fiscal years 2020-23 on NSDP (all SBs under PLL met). ### PLL qualification assessment and key macro-financial metrics - Jamaica continues to meet PLL qualification requirements. - External position and market access: - Current account balance improved to 3 percent of GDP in CY2023 from a deficit of 0.8 percent of GDP in CY2022. - Over last 5 years current account balanced on average; deficits when present remained below 2 percent of GDP. - FDI flows averaged 1.7 percent of GDP and more than fully financed current account. - Between 2019 and 2023 non-government flows represented around ¾ of portfolio flows and over 80 percent of other investment flows. - Foreign direct investment accounted for 51 percent, portfolio investment 21 percent of external liabilities at end-2023. - Jamaica issued a global bond for US$815 million in 2019 and a J$46.6 billion (about US$300 million) domestic currency denominated global bond in 2023. - Sovereign rating actions: Fitch upgraded to BB- with “positive” outlook in March 2024; Moody’s affirmed B1 with “positive outlook” in April 2024; S&P upgraded to BB- with “stable” outlook in September 2023. - Sovereign spreads fluctuated around 200 bps in 2023 and fell to about 145 bps since year-end. - Gross international reserves reached US$5.23 billion at end-March 2024—89.4 percent of the Reserve Adequacy (ARA) metric. - Reserves averaged 95 percent of the ARA metric over the past three years, marginally below the 100 percent threshold; reserves close to or above 80 percent of ARA metric since 2017. - Mitigating factors for reserve comfort: public sector deposits close to 4 percent of GDP, decreasing debt, and insurance against natural disasters for about 5 percent of GDP. - Liquidity Coverage Ratios for FX flows have remained between 2-5 times the minimum requirement since end-2020. - Fiscal policy and public debt: - FRL public debt goal of 60 percent of GDP and balanced budget rule with escape clauses and automatic adjustment mechanism. - Central government debt declined from 142 percent of GDP in FY2009/10 to 73 percent of GDP in FY2023/24. - Debt assessed sustainable with high probability; large primary surpluses in MTFF ensure sustainability. - Recent debt buybacks and issuance of long-dated global bonds reduced gross financing needs to around 5 percent of GDP. - Risk factors: global commodity markets, natural disasters, public bodies’ contingent liabilities; weather-related contingent liabilities mitigated by diverse insurance instruments including renewed CCRIF policy for about 5 percent of GDP. - Monetary policy and inflation: - Inflation averaged 7 percent (e.o.p.) over 2019-23. - Inflation was within or below the IT regime target bands adopted in 2017—except 2022-23. - Global shocks pushed inflation above target band during Aug 2021-23; BOJ and prudent fiscal policy brought inflation within target band by end-March 2024. - Financial sector soundness: - End-2023: CAR 14.6 percent and NPL 2.5 percent; sector profitable, well capitalized, and liquid. - BOJ stress tests suggest resilience to tail events. - Domestic risks: concentrated ownership, related party and large group exposures, off-balance sheet positions. - External risks: tighter global conditions, ongoing conflicts, climate-related events. - Data adequacy: - Data provision broadly adequate for surveillance. - GDDS participation since 2003; e-GDDS implemented in 2017. - Ongoing improvements in national accounts, price statistics (GDP rebasing, Household Expenditure Survey updated CPI weights in 2020), government finance statistics, and public sector debt statistics. ### Debt consolidation across sectors, DSA, and risk analysis - Public debt outlook and structure: - DSA covers central government, public bodies and guaranteed debt; authorities improving coverage and quality of public finance data to expand to general government. - Residual maturity: 9.8 years. - Share of external debt expected to decline over medium term as domestic debt market develops; local currency debt projected to decline with fiscal surpluses and use of government deposits to pay down domestic debt. - Baseline public debt projection (percent of GDP): - Public debt: Actual 2023: 73.3; 2024: 67.8; 2025: 64.7; 2026: 61.9; 2027: 58.9; 2028: 55.9; 2029: 53.2; 2030: 50.6; 2031: 48.6; 2032: 46.9; 2033: 45.5; 2034: 43.9. - Change in public debt: 2024: -3.7; 2025: -5.5; 2026: -3.1; 2027: -2.9; 2028: -3.0; 2029: -3.0; 2030: -2.7; 2031: -2.6; 2032: -2.1; 2033: -1.6; 2034: -1.4; Final year: -1.6. - Primary deficit (percent of GDP): 2023: -5.7; 2024: -5.6; 2025: -5.0; 2026: -4.7; 2027: -4.7; 2028: -4.5; 2029: -4.2; 2030: -4.0; 2031: -3.5; 2032: -3.0; 2033: -2.8; 2034: -2.8. - Noninterest revenues and expenditures (2023–2034): Noninterest revenues: 30.5, 31.0, 30.6, 30.4, 30.5, 30.5, 30.5, 30.5, 30.5, 30.5, 30.5, 30.5. Noninterest expenditures: 24.8, 25.4, 25.6, 25.7, 25.8, 26.0, 26.3, 26.5, 27.0, 27.5, 27.8, 27.7. - Gross financing needs (percent of GDP): 2023: 4.5; 2024: 8.8; 2025: 4.9; 2026: 5.2; 2027: 5.4; 2028: 6.9; 2029: 5.0; 2030: 5.3; 2031: 5.2; 2032: 5.9; 2033: 6.1; 2034: 6.4. - Debt service (2023–2034): 10.2, 14.4, 9.9, 9.9, 10.1, 11.5, 9.2, 9.4, 8.7, 8.9, 8.8, 9.2. Local currency portion: 3.1, 7.3, 4.9, 4.0, 4.5, 6.7, 6.0, 5.1, 5.9, 6.2, 6.2, 6.7. Foreign currency portion: 7.2, 7.1, 4.9, 5.9, 5.7, 4.8, 3.2, 4.2, 2.8, 2.7, 2.7, 2.5. - Realism and risk analysis: - Realism analysis finds no major concerns; past forecast errors show no systematic biases; projected debt reduction within norms. - Debt fanchart module: Fanchart width: 38.8 0.6 (percent of GDP); Debt fanchart index (DFI): 1.2; Risk signal: Moderate; Probability of debt non-stabilization: 4.4 0.0 percent. - GFN module: Average baseline GFN (percent of GDP): 6.0 2.1; GFI: 6.0; Risk signal: Low. - Medium-term index: Low risk / Moderate; Prob. of missed crisis, 2024-2029 if stress not predicted: 9.1 pct.; Prob. of false alarms: 58.0 pct. - Long-term risk: Moderate. Customized scenario assumes real GDP growth 2 percent, GDP deflator 5 percent, primary balance surplus 1 percent — primary balance much lower than 6.6 percent average over last ten years. - Pension and health risks flagged: pension parametric reforms recommended; actuarial reviews every three years to inform reforms for National Insurance Scheme and public employee pensions. - Climate adaptation costs manageable; standardized and customized scenarios add investments of 0.4 percent and 0.2 percent of GDP over long run respectively. - External debt sustainability: - External debt (percent of GDP): 2018: 85.8; 2019: 82.6; 2020: 103.8; 2021: 92.6; 2022: 78.8; 2023: 72.3; 2024: 65.1; 2025: 59.9; 2026: 56.3; 2027: 53.7; 2028: 51.0. - Debt-stabilizing non-interest current account: -2.7 (2028). - Gross external financing needs (US$ billions): 2.3, 2.6, 2.1, 2.7, 2.1, 2.3, 2.6, 2.5, 2.9, 3.1, 3.0 (2018–2028). ### Annex summaries — External Economic Stress Index and RSF Reform Measures - External Economic Stress Index (ESSI): - Captures external environment via key external risks, proxy variables, and weights. - Main vulnerabilities: dependence on fuel and food imports; dependence on global financial conditions; trading partner growth (Canada, United Kingdom, United States). - Proxy variables: WEO Commodity Food Price Index / WEO Crude Oil Price Index; 6-month U.S. treasury rate plus EMBIG spread; VIX; weighted trading partner GDP growth. - Weights: Oil prices 0.13; Food prices 0.13; Funding costs 0.07; Volatility 0.05; Trading partner GDP growth 0.62. - April 2024 WEO baseline: external stress projected to remain high vs. pre-Covid but less than at PLL request; external financial conditions tighter. - Revised downside scenario: fuel prices 15 percent above baseline, 150 bps increase in sovereign and corporate premia in H2 2024; shock effects dissipate in 2025. - Annex III — RSF Reform Measures: content and impact (selected RMs and outcomes): - RM1 (DRF policy): comprehensive disaster risk financing approach adopted; implementation plan with budgeting, financial resilience, and institutional capacity elements (World Bank TA). - RM2 (PPP climate integration): PPP policy and SOP manual revised to integrate climate requirements across project lifecycle (IDB TA). - RM3 (Climate impact assessment methodology in PIMS): methodology defined and incorporated in PIMS handbook; mandatory use across government agencies (IDB TA). - RM4 (Project selection criteria incl. climate): PIOJ published project selection criteria including climate criteria; guidance and worksheets developed (IDB TA). - RM6 (NDRF establishment): amendment to FAA submitted and financial regulations approved; NDRF established with minor deviation as separate account alongside consolidated fund. - RM8 (Electric Vehicles Policy): EVP submitted; projected EV share and emissions savings over next decade (IDB TA). - RM9 (Energy efficiency guidelines): guidelines for schools, hospitals, public buildings adopted; prior programs saved JD131.5 million and >0.6 million barrels of oil. - RM10 (BOJ climate risks assessment): BOJ published diagnostic and timeline to embed climate risks in supervision (AFD support). - RM11 (Monitoring framework for climate-related stress testing): timeline for data collection starting early 2025; first data submission by end-September 2025; BOJ climate risk data dashboard by end-March 2026. - RM12 (Green bond framework): institutional framework established; guide available on Jamaica Stock Exchange website; builds on GCF Readiness Grant US$0.6 million. - RM5 (MOFPS Fiscal Risk Statement quantitative analysis): - Purpose: quantify climate impact on fiscal risks; methodology identifies climate risks over MTFF lifecycle, data sources, and integration processes for FRS. - External inputs: World Bank’s 2018 report, IMF C-PIMA, IMF FAD technical support. - RM7 (Personal income tax rebates for residential solar): bill passed July 9, 2024; rebates apply to panels acquired and installed on/after January 1, 2023; authorities estimate potential revenue loss ~ J$ 100 million. ### Key policy recommendations and implementation priorities - Maintain fiscal consolidation consistent with FRL target of 60 percent of GDP by FY2027/28. - Continue liability management, buybacks, and maturity extension to reduce near-term financing needs and lengthen maturities. - Strengthen public finance data coverage and quality, expanding to general government and improving intra-government debt reporting. - Prepare for natural disaster shocks and contingent liabilities via fiscal buffers and contingency planning. - Undertake parametric reforms to public pension system; continue actuarial reviews every three years. - Monitor healthcare cost growth and consider policy action if higher-cost scenarios emerge. - Advance development of domestic debt market to reduce reliance on external currency debt. - Publish beneficial ownership information for companies awarded public contracts to limit corruption vulnerability. - Continue AML/CFT strengthening ahead of the fifth round Mutual Evaluation Process (June 2026). - Operationalize RM11 data collection and BOJ climate stress testing timetable (first data submission end-September 2025; BOJ dashboard by end-March 2026). *Source: IMF staff report content provided in the supplied excerpt.* ### EXECUTIVE SUMMARY ### EXECUTIVE SUMMARY ### Context - Supported by strong policy frameworks, Jamaica has managed to respond to recent global shocks prudently. - Policies have supported the economy while still reducing public debt and inflation. - Growth has been solid, the external position has strengthened, and the economic outlook remains a positive one. - The outlook is exposed to risks from a global growth deceleration, tighter than expected global financial conditions, commodity price volatility, and natural disasters. ### Precautionary and Liquidity Line (PLL) - Staff recommends completion of the Third PLL Review as all structural benchmarks and the quantitative indicative target (IT) for net international reserves (NIR) have been met. - The IT for the fiscal balance was marginally missed—while still in surplus—with a negligible impact on the debt consolidation path and FRL’s targets remaining unchanged going forward. - Jamaica continues to meet the PLL qualification criteria, and the authorities remain committed to implementing strong policies. - The authorities intend to continue to treat the PLL as precautionary. - Under the PLL: - Net international reserves reached US$ 5.14 billion by end-March 2024, above the IT of US $4.40 billion. - The end-March 2024 overall fiscal surplus of the central government was J$ 1.172 billion, below the IT of J$ 8.249 billion (a difference of about 0.2 percent of GDP). - The Ministry of Finance and Public Service (MOFPS) disseminated General Government data for fiscal years 2019/20, 2020/21, 2021/22 and 2022/23 in the National Summary Data Page (NSDP). - The Bank of Jamaica (BOJ) conducted the Non-Financial Corporations (NFC) survey to obtain data for Direct Investment Intercompany Lending positions for each quarter of 2023. - The Special Resolution Regime law was submitted to parliament to strengthen the resolution of non-viable financial institutions. ### Resilience and Sustainability Facility (RSF) - The authorities have completed all the reform measures for the third review. - This allows for disbursements of SDR191.45 million (50 percent of quota) under the RSF. - RSF-supported reforms and measures completed: - The MOFPS published in the Fiscal Risk Statement quantitative analysis of the fiscal risks generated by climate change. - The MOFPS submitted to parliament a bill to incentivize investment in renewables through fiscal measures; the bill was passed by parliament on July 9, 2024. - The BOJ adopted a monitoring framework that improves data collection and establishes the reporting requirements for financial institutions. - The authorities established a framework for green-bond issuance and trading. - The RSF has supported measures to: - Accelerate the transition to renewables. - Increase resilience to climate change. - Enhance the climate focus in fiscal policy frameworks. - Strengthen the management of climate risks by financial institutions. - Catalyze climate financing. - The response to hurricane Beryl highlighted the timeliness of RSF reforms, including measures to strengthen the natural disaster risk financing framework and enhance the assessment of climate-related fiscal risks. ### Recent Developments - Growth and labor market: - GDP is estimated to have grown slightly above potential in FY2023/24 with growth reaching 2 percent. - Tourism is above pre-pandemic levels and mining rebounded after the prolonged 2021 outage in one of Jamaica’s largest alumina plants. - Unemployment fell to a record-low of 4.2 percent in October 2023. - FY2024/25 growth is projected at around 1.7 percent. - Inflation: - Inflation has returned to the BOJ’s target band of 4-6 percent. - At end-May 2024, headline and core inflation were at 5.2 and 5.7 percent respectively. - External sector: - The current account is estimated to have recorded a surplus slightly above 2 percent of GDP in FY2023/24. - FDI is rising, although remains below historical averages. - International reserves at end-March reached about US$5.2 billion, the highest level in Jamaica’s history. - Public finances: - Public debt-to-GDP ratio is now 73 percent of GDP, nearly 40 percentage points of GDP below the peak during COVID. - The FY2023/24 budget recorded a small overall surplus and a primary surplus of about 5.7 percent of GDP. - Execution of capital expenditures was below the budgeted amount. - Two determinants of the March CIT shortfall included higher-than-expected accumulation of arrears and lower profits in the insurance sector due to IFRS17 implementation. - Financial sector: - Banks’ capital adequacy ratio was 14.6 percent at end-2023. - At end-April, NPLs at about 2 ½ and past due loans at about 3½ percent of total loans were in line with pre-pandemic levels. - Banks hold high-quality liquid assets at four times the regulatory minimum. - BOJ stress tests show banks resilient to higher bond yields and deterioration in loan quality. - Natural disaster: - On July 3, hurricane Beryl caused heavy rains, life-threatening winds, flash flooding, mudslides, infrastructure and agricultural damage in the southwestern region, and loss of power and telecommunication services for about two-thirds of the population. - Authorities called for evacuation and opened shelters; an evaluation of damages and recovery efforts has begun. - Beryl creates temporary downside risks to growth and upside risks to inflation. ### Outlook and Risks - Medium-term projections and key figures (percent of GDP unless otherwise specified): - GDP growth: 2023/24 Est. 1.9; 2024/25 Proj. 1.7; 2025/26 Proj. 1.7; 2026/27 Proj. 1.6; 2027/28 Proj. 1.6; 2028/29 Proj. 1.6. - Consumer price inflation (e.o.p.): 2023/24 Est. 5.6; 2024/25 Proj. 5.0; 2025/26 Proj. 5.0; 2026/27 Proj. 5.0; 2027/28 Proj. 5.0; 2028/29 Proj. 5.0. - Consolidated public sector debt: 2023/24 Est. 73.3; 2024/25 Proj. 67.8; 2025/26 Proj. 64.7; 2026/27 Proj. 61.9; 2027/28 Proj. 58.9; 2028/29 Proj. 55.9. - Current account: 2023/24 Est. 2.4; 2024/25 Proj. 1.0; 2025/26 Proj. 0.1; 2026/27 Proj. -0.8; 2027/28 Proj. -1.7; 2028/29 Proj. -2.0. - Foreign direct investment: 2023/24 Est. 2.1; 2024/25 Proj. 2.4; 2025/26 Proj. 2.8; 2026/27 Proj. 2.8; 2027/28 Proj. 2.9; 2028/29 Proj. 2.9. - Gross reserves (US$million): 2023/24 Est. 5,232; 2024/25 Proj. 5,400; 2025/26 Proj. 5,500; 2026/27 Proj. 5,550; 2027/28 Proj. 5,600; 2028/29 Proj. 5,650. - Outlook summary: - Growth is expected to converge to potential and inflation to return close to the mid-point of the target band in 2024 amid moderating energy prices and transport fares. - Current account expected to converge to a deficit of about 2 percent of GDP over the medium term as climate-related projects increase imports. - FDI expected to recover to about 3 percent of GDP over the medium term. - Debt is expected to fall below 60 percent of GDP by FY2027/28, guided by the Medium-Term Fiscal Framework (MTFF). - Downside risks: - Tighter-than-expected global financial conditions. - Lower global growth affecting tourism and remittances. - Intensification of geo-political conflicts increasing global commodity prices. - Natural disasters posing risks to activity, public debt, and financial stability. ### Performance Under the Arrangements - All structural benchmarks (SB) and the indicative target (IT) on net international reserves under the PLL were met; the IT on the fiscal balance was marginally missed. - The authorities have announced they are assessing reasons behind the revenue shortfall and are committed to offsetting spending cuts—if factors behind weaker than expected tax collection are not assessed as temporary by the middle of FY2024/25—to attain the legislated surplus of 0.3 percent of GDP. ### Policies Under the Arrangements A. Macroeconomic Policies - FY2024/25 budget aims: - Primary surplus target of 5.6 percent of GDP that would lower public debt to 68 percent of GDP by the end of the fiscal year. - Capital expenditure projected at 2.4 percent of GDP to finance projects to boost climate resilience. - Performance provisions in public employee compensation to incentivize efficiency gains and improvements in education and health care. - Contingency planning and financing for hurricane response: - Use of the Contingencies Fund, CCRIF, and the Contingent Credit Facility through the IDB. - Likely adjustments to current expenditure while keeping the fiscal balance target unchanged. - Monetary policy: - BOJ has held rates at 7 percent since November 2022. - BOJ maintained the policy rate at 7 percent in June while starting a gradual reduction of liquidity absorption operations. - Data-dependent approach to return inflation to the mid-point of the target band; patience in lowering rates is warranted given the strong cyclical position. - Macroeconomic resilience: - Public debt assessed to be sustainable with a high probability (Annex II). - Insurance and contingency instruments: Contingencies Fund, National Natural Disaster Risk Fund, CCRIF, Contingent Credit Facility with the IDB, and a catastrophe bond (CAT) (the CAT was not triggered with Beryl). - Record-high international reserves and recent sovereign credit rating upgrades with low sovereign spreads. B. Strengthening Institutions - Fiscal policy framework enhancements: - Fiscal Commission to be operational in FY2024/25 to provide assessments of macroeconomic and fiscal forecasts, consistency of the budget with fiscal rules, and debt sustainability. - Procurement and Public Finance Management reforms following the Electronic Procurement System (August 2023), including: - Pre-engagement checklists for procurement officers. - Guidance notes for procurement committees to optimize decision-making. - Revised bid evaluation methods with clear timelines. - Revised thresholds for single source procurement and intervention of the Public Procurement Commission. - Development of a Public Investment Management Information System to enhance public investment efficiency. - Fund’s Agile Public Expenditure and Financial Accountability assessment to inform public financial management improvements. - Staff encourages swift publication of beneficial ownership of companies awarded public contracts on the MOFPS website. - Revenue administration: - A new Customs Bill—to be approved this FY—will foster revenue mobilization. - Authorities are improving management of tax arrears with support from the Canada Revenue Agency. *Source: Jamaica — Executive Summary (July 24, 2024).* ### 15. There are ongoing initiatives to strengthen the social safety net. These entail employment ### 1jamea2024002-print-pdf - 15. There are ongoing initiatives to strengthen the social safety net. These entail employment ### Social safety net and labor-market measures - Ongoing initiatives to strengthen the social safety net include employment services for employees and employers and the implementation of an Integrated Social Protection Information System. - Authorities—with support from the World Bank—are considering putting in place an unemployment insurance scheme that could help lessen income volatility, defray the costs of job search, and provide time-bound incentives to return to work. ### Public debt management and liability operations - Public debt management continues to lessen currency and rollover risks. - In November, the Government of Jamaica issued the first ever local currency denominated global bond for US$300 million to pay down dollar-denominated debt coming due in 2025 and 2028. - As part of the medium-term debt management strategy, the authorities will continue opportunistic liability management operations to reduce financing costs and risks while maintaining efforts to further develop local currency bond markets. ### Safeguards, BOJ autonomy, and internal controls - The 2023 Safeguards Assessment found a broadly strong safeguards framework. - Progress includes strengthened external audit selection and rotation arrangements. - Remaining scope for improvement: capacity in risk management and coverage of internal audit, particularly related to co-sourcing of IT audits. - Previous legal amendments to the BOJ Act strengthened the BOJ’s autonomy and mandate; further enhancements to BOJ autonomy are underway as part of legislative reform to adopt a “twin peaks” supervisory regime. ### Financial oversight and AML/CFT framework - Adoption of Basel III: - Regulatory capital reporting has used both pre-Basel III and Basel III requirements during the last two years. - Legislative process underway to put in place the Capital Conservation Buffer and the Systemic Risk Buffer under Pillar 1. - Implementation of Pillar 2 is proceeding, including the Internal Capital Adequacy Assessment Process, the Supervisory Review and Evaluation Process, and the framework for designating Domestic Systemically Important Financial Institutions. - Pillar 3, scheduled for 2026, will focus on market disclosures and the introduction of additional capital and liquidity requirements including the Net Stable Funding Ratio. - Consolidated supervision and supervisory architecture: - The BOJ will become the sole prudential regulator in 2026. - The BOJ has licensed five out of eight financial conglomerates—the remaining three will be licensed by end-2024. - Amendments to the Financial Services Act submitted to parliament to place supervision of financial conglomerates without deposit-taking institutions under the Financial Service Commission (FSC). - A “twin peaks” supervisory regime, with the BOJ as the sole prudential regulator and the FSC overseeing market conduct and consumer protection, is expected by 2026. - BOJ’s supervisory remit will be extended to cover credit unions once relevant legislation is adopted in FY2024/25. - Special resolution regime: - A new legal framework for the special resolution regime (SRR) was submitted to parliament to mitigate risks from failing financial institutions, establish administrative mechanisms for resolution, resolution funding arrangements, and a winding-up framework. - AML/CFT progress: - Authorities implemented an AML/CFT action plan comprising 13 actions addressing vulnerabilities from the 2017 Mutual Evaluation Report, including completion and dissemination of a National Risk Assessment (NRA); adoption of risk-based supervision (RBS); measures on beneficial ownership information; investigation and prosecution of ML offences; and technical amendments related to targeted financial sanctions (TFS). - An on-site FATF assessment verified implementation of AML/CFT reforms last spring, and Jamaica exited FATF increased monitoring (grey list) this June. - Jamaica will continue improving its AML/CFT framework in preparation for the fifth round of the Mutual Evaluation Process. - Climate-related supervisory enhancements: - The BOJ developed a strategy to better manage climate-related financial risks focused on (i) developing supervisory capacity, (ii) integrating climate risks into macroprudential supervision, and (iii) operationalizing stress testing of financial institutions. - Under the RSF, the BOJ has completed the first stage of this strategy. ### Climate policies under the Resilience and Sustainability Facility (RSF) - RSF-supported reform measures (RMs) covered the three pillars of the authorities’ climate strategy: - Resilience to natural disaster and climate change: - Disaster risk financing policy adopted to select cost-effective financing mechanisms (RM1). - National Natural Disaster Fund established (RM6). - Revised PPP policy framework to include climate requirements (RM2). - Methodology to conduct climate impact assessment at project appraisal stage adopted (RM3). - Project selection criteria including climate change criteria codified (RM4). - Climate risks integrated into fiscal planning (RM5) with quantitative appraisals under different climate change scenarios. - Greening the financial sector: - BOJ prepared an assessment of climate risks and a timeline to incorporate them into supervisory activities (RM10). - Monitoring framework to improve data collection and establish reporting requirements for climate-related stress testing (RM11). - Framework for green bond issuance established (RM12). - Mitigation: - New electric vehicles (EV) policy (RM8) and energy efficiency guidelines for public buildings (RM9) adopted. - New personal income tax rebates to incentivize take up of solar panels (RM7). - Existing incentives include zero-rated VAT for inputs or raw materials for manufacture of solar and wind equipment, lower import tariffs for renewable energy items and EVs, license fees exemptions for EVs, and net billing. - In June, authorities tabled an amendment reducing the corporate income tax rate from 33 1⁄3 to 25 percent for independent power producers generating at least three-quarter of power from renewable sources. - RSF support for disaster response and resilience: - RSF reforms support the response to hurricane Beryl and future climate events. - RM1 and RM6 contributed to a multilayer set of financial instruments for climate events. - RM3 and RM4 enhance the public investment framework to improve resilience and recovery. - RM5 improves identification and assessment of climate-related fiscal risks to calibrate resources needed for resilience and faster recoveries. - Initiatives to foster renewable investments: - In July the government selected two bidders (out of 12 proposals) to generate 100MW (about 10 percent of existing capacity) renewable energy; another tender for renewable generation will be announced later this year. - Successful bidders will enter into a 20-year power purchase agreement with the public electric utility. - Plans to double the number of charging stations for EVs to facilitate their use. - RSF fiscal impact and savings: - RSF disbursements to the budget augment Jamaica’s fiscal space. - RSF substitutes more expensive market financing with cumulative estimated savings of 0.4 percent of GDP through FY2027/28. - Mitigation measures’ savings (e.g., efficiency guidelines) will accrue gradually as their impact materializes over time. - RSF RMs are expected to enhance resilience to natural disasters. - Catalyzing climate financing: - RSF plays a convening role through the IMF’s Climate Finance Task Force, in coordination with development partners. - Authorities announced a strategy to enhance climate financing and are discussing modalities of establishing a Blue Green Facility to catalyze private investment. - Work with the IDB to operationalize a Project Preparation Facility and setting up a Climate Finance Unit at the MOFPS. - The Caribbean Community Resilience Fund recently launched operations in Jamaica to attract private investors for renewable energy, blue economy, and climate-smart agriculture. ### Strengthening data adequacy - Authorities pursuing a comprehensive action plan to improve data. - In 2023, a Special Data Dissemination Standards (SDDS) assessment mission by the Fund’s Statistics Department agreed an action plan to allow Jamaica’s subscription to the SDDS by mid-2025. - The national statistics agency is working on a restructuring plan to attract qualified staff, close capacity gaps, and improve data management systems. - In the context of the PLL arrangement, key data gaps closed towards SDDS subscription included: - i) the compilation and dissemination of data on General Government Operations; and - ii) the improvement of the coverage and timeliness of external sector statistics data. - The BOJ now submits the International Reserve and Foreign Currency Liquidity template data and has conducted a Non-Financial Corporations survey to obtain data for Direct Investment Intercompany Lending positions. - The MOFPS compiled and disseminated General Government data for fiscal years 2020-23 on the National Summary Data Page (all SBs under the PLL). ### PLL qualification assessment and key macro-financial metrics - Jamaica continues to meet qualification requirements for a PLL arrangement. - External position and market access: - Current account balance improved to 3 percent of GDP in CY2023 from a deficit of 0.8 percent of GDP in CY2022. - Over the last 5 years the current account was balanced on average and when negative the deficit remained below 2 percent of GDP. - FDI flows averaged 1.7 percent of GDP and more than fully financed the current account. - Between 2019 and 2023, non-government flows represented around ¾ of portfolio flows and over 80 percent of other investment flows. - Foreign direct investment accounted for 51 percent, while portfolio investment accounted for 21 percent of external liabilities at end 2023. - Jamaica issued a global bond for US$815 million in 2019 and a domestic currency denominated global bond for J$46.6 billion (about US$300 million) in 2023. - Sovereign rating actions: Fitch upgraded to BB- with a “positive” outlook in March 2024; Moody’s affirmed B1 with “positive outlook” in April 2024; S&P upgraded to BB- with “stable” outlook in September 2023. - Sovereign spreads fluctuated around 200 bps in 2023 and fell to about 145 bps since year-end. - Gross international reserves reached an all-time record-high of US$5.23 billion at end-March 2024—89.4 percent of the Reserve Adequacy (ARA) metric. - Reserves averaged 95 percent of the ARA metric over the past three years, marginally below the 100 percent threshold; reserves have remained close to or above 80 percent of the ARA metric since 2017. - Mitigating factors for reserve comfort include public sector deposits close to 4 percent of GDP, decreasing debt, and sizeable insurance against natural disasters for about 5 percent of GDP. - Liquidity Coverage Ratios (LCR) by currency require High Quality Liquid Assets above 100 percent of (expected) net cash outflows continuously; LCRs for FX flows have remained between 2-5 times the minimum requirement since end-2020. - Fiscal policy and public debt: - Jamaica’s FRL established a public debt goal of 60 percent of GDP and a balanced budget rule with escape clauses and an automatic adjustment mechanism. - Central government debt declined from 142 percent of GDP in FY2009/10 to 73 percent of GDP in FY2023/24. - Debt is assessed as sustainable with a high probability; large primary surpluses in the MTFF ensure debt sustainability. - Recent debt buybacks and issuance of long-dated global bonds have reduced gross financing needs to around 5 percent of GDP. - Risk factors include global commodity markets, natural disasters, and public bodies’ contingent liabilities; weather-related contingent liabilities are mitigated by diverse insurance instruments, including a renewed insurance policy with the Caribbean Catastrophe Risk Insurance Facility Segregated Portfolio Company for about 5 percent of GDP. - Monetary policy and inflation: - Inflation averaged 7 percent (e.o.p.) over 2019-23. - Inflation was within or below the target bands adopted with the IT regime in 2017—except for 2022-23. - Global shocks pushed inflation above the target band during August 2021-23; the BOJ and prudent fiscal policy brought inflation within the target band by end-March 2024. - Financial sector soundness and supervision: - At end-2023 the financial sector was profitable, well capitalized, and liquid: CAR was 14.6 percent and NPL 2.5 percent. - BOJ stress tests suggest the financial sector is resilient to tail events. - Domestic risks include concentrated ownership, related party and large group exposures, and off-balance sheet positions. - Main external risks stem from tighter global conditions, ongoing conflicts, and climate-related events. - PLL conditionality supported enhancements in supervision of financial conglomerates, finalization of a resolution framework, and strengthening of the AML/CFT framework. - Data adequacy: - Data provision is broadly adequate for surveillance. - Jamaica has participated in GDDS since 2003 and implemented the enhanced GDDS (e-GDDS) in 2017. - Improvements to national accounts and price statistics continue, including an ongoing GDP rebasing and a Household Expenditure Survey that updated CPI weights in 2020. - Improvements in government finance statistics and public sector debt statistics were achieved during the last Fund program. *Italic line: Source: IMF staff report content provided in the supplied excerpt.* ### 2018. Jamaica did not substantially underperform on data transparency and integrity, but ### 2018. Jamaica did not substantially underperform on data transparency and integrity, but ### Institutional strength - The institutional policy framework is sound. - Recent reforms and actions: - Approval of the 2018 Procurement Act. - Procurement system reforms announced in the 2024/25 Budget. - Amendments to strengthen the BOJ’s mandate and autonomy. - Introduction of a new governance framework for public bodies. - Recommendation: - Publication of beneficial ownership information of companies awarded public contracts would help limit corruption vulnerability. ### Debt sustainability and capacity to repay the Fund - Program stance and timeline: - The authorities continue to treat the PLL as precautionary. - Jamaica is assessed to be in a strong position to exit the PLL by early-2025 (the PLL expires on February 28, 2025), as external risks subside. - Debt sustainability assessment: - Debt is sustainable with high probability. - Jamaica has demonstrated an excellent track record in performing its fiscal targets for more than a decade. - Even in a PLL disbursement scenario, debt would be sustainable with high probability. - Capacity to repay the Fund (Table 6 referenced): - Debt outstanding to the IMF in a PLL purchase scenario would reach around 375 percent of quota (225 percent of quota excluding the RSF) or 9.1 percent of GDP in 2024. - Debt service to the Fund in a PLL purchase scenario would peak in 2028 at SDR 443 million (SDR 414 million excluding the RSF) corresponding to 2.4 percent of GDP, 6.6 percent of exports or 10.4 percent of gross international reserves. - Financing and safeguards: - Over the longer term, risks are mitigated by the authorities’ strong commitment to reforms and debt sustainability. - The program is fully financed (without RSF disbursements) through the remainder of the program (see Table 9). - Credible policy frameworks mitigate risks. - Resources under the RSF are disbursed as budget support. - The Memorandum of Understanding between the MOFPS and the BOJ defining service responsibilities associated with the RSF financing was signed in April 2023. ### Staff appraisal — macroeconomic outcomes and buffers - Recent shocks and policy response: - The response to recent shocks has strengthened the credibility of Jamaica’s policy frameworks. - Authorities used flexibility in the Fiscal Responsibility Law but then promptly returned to debt targets. - Monetary policy decisions anchored in the inflation targeting framework. - Observed outcomes: - Economic environment after recent shocks was characterized by strong growth, declining debt, low inflation, and a strengthened external position—exceeding program targets for international reserves. - Public debt fell by nearly 40 percentage points of GDP since FY2020/21. - The response to hurricane Beryl demonstrates the strength of Jamaica’s multilayer disaster risk financing framework. - FY2024/25 budget and targets: - The FY2024/25 budget is targeting a primary surplus that would lower public debt to 68 percent of GDP by the end of the fiscal year. - This is consistent with the FRL goal of placing public debt at or below 60 percent of GDP by FY2027/28. - Revenue, expenditure, and governance measures: - Improvements in tax administration are supporting revenue mobilization. - Expenditure increases are targeted towards public investment, supported by reforms in procurement procedures. - Staff encourages the authorities to fulfill their plans to publish beneficial ownership of companies awarded public contracts. - Financial system resilience: - The financial system remains well capitalized, liquid, and stable. - The policy mix continues to build buffers to mitigate risks from lower-than-expected global growth, tighter-than-expected global financial conditions, commodity price volatility, and natural disasters. ### Financial supervision, crisis resolution, AML/CFT, and data improvements - Financial supervision and regulatory reform: - Adoption of Basel III is advancing with progress in the adoption of Pillars 1 and 2. - Consolidated supervision has been strengthened. - Licensing of financial conglomerates will be completed by end-2024. - The BOJ will become the sole prudential regulator in 2026 after adoption of a “twin peaks” regime. - The Special Resolution Regime Bill to strengthen the crisis resolution framework was submitted to parliament this June. - AML/CFT and monitoring: - Authorities enhanced the effectiveness of the AML/CFT framework, allowing Jamaica to exit FATF’s increased monitoring (grey list). - Data improvements: - A comprehensive action plan to improve data, including on the fiscal and external sectors, has been pursued. ### RSF and climate resilience - Role of the RSF: - The RSF has supported Jamaica’s ambitious agenda to make the economy more resilient to climate change. - It comprised the three pillars in the authorities’ strategy, including adaptation, mitigation, and the management of transitional risks. - Program reforms and outcomes: - Reforms are helping to accelerate the transition to renewables. - Reforms increase resilience to climate change. - Reforms enhance the climate focus in fiscal policy frameworks. - Reforms strengthen the management of climate risks by financial institutions. - Reforms create an enabling environment for green financial instruments. - Potential: - These efforts have the potential to catalyze climate financing going forward. *Source: IMF staff report (Jamaica).* ### 38. Staff recommends the completion of the third reviews under the PLL and the RSF ### Staff recommends the completion of the third reviews under the PLL and the RSF ### Recommendation - Staff recommends completing the third reviews under the Precautionary and Liquidity Line (PLL) and the Resilience and Sustainability Facility (RSF) arrangements. ### Qualification and authorities' commitment - Jamaica continues to meet the PLL qualification criteria. - The authorities remain committed to implementing strong policies. ### Compliance with program conditions and benchmarks - All structural benchmarks and the quantitative indicative target (IT) for net international reserves under the PLL have been met. - Reform measures 5, 7, 11, and 12 under the RSF have been met. - The IT for the fiscal balance was marginally missed—while still in surplus—with a negligible impact on the debt consolidation path. ### Key fiscal and debt figures (as presented) - Public debt (FRL definition, percent of GDP) 2022/23: 109.7. - Budgetary revenue (percent of GDP): 29.5 (2022/23). - Tax revenue (percent of GDP): 25.9 (2022/23). - Budgetary expenditure (percent of GDP): 32.6 (2022/23). - Budget balance (percent of GDP) 2022/23: -3.1. - Central government primary balance (percent of GDP) 2022/23: 3.5. - Gross international reserves (US$ millions): 4,244 (2022/23) and 4,324 (2023/24). - Net international reserves (US$ millions): 3,319 (2022/23) and 3,676 (2023/24). - Unemployment rate (October 2023): 4.2 percent. ### External sector and financing facilities - Table 7 (PLL schedule and terms): - March 1, 2023: Board approval of the PLL — 459.48 millions SDR, cumulative 120 percent of quota, cumulative 63 percent of total access. - August 31, 2023: First review — cumulative unchanged at 459.48 millions SDR. - February 29, 2024: Second review — cumulative 727.51 millions SDR, 190 percent of quota, 100 percent of total access. - August 31, 2024: Third review based on March 31, 2024 quantitative targets — cumulative 727.51 millions SDR, 190 percent of quota, 100 percent of total access. - Table 8 (RSF access and conditions): - Multiple availability dates list repeated disbursements of 47.862 millions SDR (12.50 percent of quota) tied to completion of RSF review of specified reform measures. - Total RSF access: 574.35 millions SDR (150 percent of quota). - Memorandum item: Quota = 382.90 (millions SDR). - Table 9 (External Financing Requirements, selected program numbers): - Gross Financing Needs (FY 2023/24 baseline, 3rd Review): 2,277 (US$ millions). - Gross Financing Needs (FY 2024/25 baseline): 3,293 (US$ millions). - Gross international reserves (GIR) used in the memorandum: for FY 2023/24 baseline 5,232 (US$ millions); FY 2024/25 baseline 4,100 (US$ millions). - RSF disbursement (program projection rows): listed as 513 (US$ millions) in one scenario and 256 (US$ millions) in another within Table 9’s presentation of MLT debt disbursements with RSF. ### Program implications and outlook - Meeting of net international reserves IT and RSF reform measures supports staff's recommendation for review completion. - The marginal miss on the fiscal-balance IT did not undermine the surplus outcome and has a negligible impact on the debt consolidation path. *International Monetary Fund — Jamaica country report excerpt* ### 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 - Main external vulnerabilities for Jamaica: - Dependence on fuel and food imports, exposing Jamaica to commodity price volatility. - Dependence on global financial conditions for external financing to EMDEs. - 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: - Captured by international food and oil prices (WEO Commodity Food Price Index/WEO Crude Oil Price Index). - Global financial conditions: - Captured by the interest rate of the 6-month U.S. treasury bond plus the EMBIG spread for Jamaica. - Global market volatility: - Captured by the VIX. - Trading partner growth: - Captured by the weighted average of GDP growth of Canada, United Kingdom, and United States. ### Weights - Weights determined using the size of related balance of payment items between 2012 and 2020: - Oil prices weight: 0.13 (value of fuel imports). - Food prices weight: 0.13 (value of consumer goods imports). - Funding costs weight: 0.07 (value of portfolio inflows). - Volatility weight: 0.05 (value of other investments). - Trading partner GDP growth weight: 0.62 (based on Jamaica’s exports, remittances, and FDI). ### Updated baseline scenario (April 2024 WEO) - Baseline corresponds to the April 2024 WEO projections. - Key findings: - External economic stress is projected to remain high compared to the pre-Covid period. - External stress is less than at the time of the PLL request, reflecting mostly: - Lower oil and food price path assumptions. - Higher projected growth in main trading partners for 2024. - External financial conditions are tighter. ### Revised downside scenario - Combines the global downside scenario of the April 2024 WEO of geopolitical risks and divergence and global financial conditions. - Assumptions and shocks: - Renewed pressures on global commodity prices, especially fuel (15 percent above baseline). - Persistent inflation in the US leads to tighter global financial conditions. - Strong consumer demand in the US relative to other advanced and emerging economies means growth in Jamaica’s main trading partners is less affected than global output but still lower than baseline. - Risk of tighter financial conditions reflected in a 150 bps increase in sovereign and corporate premia in the second half of 2024. - The shock’s effects begin to dissipate in 2025. ### Overall assessment - 2023: - External pressures were somewhat lower than projected at program request—mostly due to higher-than-expected growth in trading partners. - 2024 baseline: - Baseline index suggests external stress will remain contained but above pre-Covid levels. - Downside risks: - Revised downside scenario highlights downside risks linked to global commodity prices and financial conditions. *Sources: WEO and IMF staff estimates.* ### 5. Debt consolidation across sectors: ### 5. Debt consolidation across sectors: ### Public debt outlook and structure - Commentary: The DSA covers debt issued by central government, public bodies and debt guaranteed by central government. The authorities are improving coverage and quality of public finance data, including expanding the coverage to general government. - Commentary: 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. In terms of maturity structure most of the planned issuances are for medium to long-term maturity. - Residual maturity: 9.8 years - Projection: Most planned issuances are medium to long-term maturity; projected decline in external debt share; projected decline in local currency debt with fiscal surpluses and use of government deposits. ### Baseline scenario (Table 3) — Key projected public debt and flows (Percent of GDP unless indicated) - Public debt: - Actual 2023: 73.3 - 2024: 67.8 - 2025: 64.7 - 2026: 61.9 - 2027: 58.9 - 2028: 55.9 - 2029: 53.2 - 2030: 50.6 - 2031: 48.6 - 2032: 46.9 - 2033: 45.5 - 2034: 43.9 - Change in public debt: - 2024: -3.7 - 2025: -5.5 - 2026: -3.1 - 2027: -2.9 - 2028: -3.0 - 2029: -3.0 - 2030: -2.7 - 2031: -2.6 - 2032: -2.1 - 2033: -1.6 - 2034: -1.4 - Final year: -1.6 - Contribution of identified flows: - 2024: -6.6 - 2025: -4.7 - 2026: -3.2 - 2027: -2.9 - 2028: -2.9 - 2029: -3.0 - 2030: -2.7 - 2031: -2.5 - 2032: -2.0 - 2033: -1.6 - 2034: -1.4 - Final year: -1.6 - Primary deficit: - 2023: -5.7 - 2024: -5.6 - 2025: -5.0 - 2026: -4.7 - 2027: -4.7 - 2028: -4.5 - 2029: -4.2 - 2030: -4.0 - 2031: -3.5 - 2032: -3.0 - 2033: -2.8 - 2034: -2.8 - Noninterest revenues: 30.5, 31.0, 30.6, 30.4, 30.5, 30.5, 30.5, 30.5, 30.5, 30.5, 30.5, 30.5 (2023–2034) - Noninterest expenditures: 24.8, 25.4, 25.6, 25.7, 25.8, 26.0, 26.3, 26.5, 27.0, 27.5, 27.8, 27.7 (2023–2034) - Automatic debt dynamics: -0.8, 1.0, 1.8, 1.8, 1.8, 1.6, 1.5, 1.5, 1.5, 1.4, 1.4, 1.2 (2023–2034) - Real interest rate and relative inflation: 1.9, 2.2, 2.9, 2.8, 2.8, 2.5, 2.4, 2.3, 2.3, 2.2, 2.1, 2.0 (2023–2034) - Real interest rate: 0.1, 0.5, 1.9, 1.8, 1.8, 1.7, 1.6, 1.6, 1.7, 1.6, 1.6, 1.5 (2023–2034) - Relative inflation: 1.8, 1.6, 1.0, 1.0, 1.0, 0.8, 0.7, 0.7, 0.6, 0.6, 0.5, 0.5 (2023–2034) - Real growth rate: -1.5, -1.2, -1.1, -1.0, -1.0, -0.9, -0.9, -0.8, -0.8, -0.8, -0.7, -0.7 (2023–2034) - Contribution of residual: 2.9, -0.8, 0.1, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0 (2023–2034) - Gross financing needs: - 2023: 4.5 - 2024: 8.8 - 2025: 4.9 - 2026: 5.2 - 2027: 5.4 - 2028: 6.9 - 2029: 5.0 - 2030: 5.3 - 2031: 5.2 - 2032: 5.9 - 2033: 6.1 - 2034: 6.4 - Debt service (of which: debt service): - Debt service: 10.2, 14.4, 9.9, 9.9, 10.1, 11.5, 9.2, 9.4, 8.7, 8.9, 8.8, 9.2 (2023–2034) - Local currency: 3.1, 7.3, 4.9, 4.0, 4.5, 6.7, 6.0, 5.1, 5.9, 6.2, 6.2, 6.7 - Foreign currency: 7.2, 7.1, 4.9, 5.9, 5.7, 4.8, 3.2, 4.2, 2.8, 2.7, 2.7, 2.5 - Memo: - Real GDP growth (percent): 1.9, 1.7, 1.7, 1.6, 1.6, 1.6, 1.6, 1.6, 1.6, 1.6, 1.6, 1.6 - Inflation (GDP deflator; percent): 8.0, 6.2, 4.6, 4.7, 4.7, 4.7, 4.7, 4.7, 4.7, 4.7, 4.7, 4.7 - Nominal GDP growth (percent): 10.0, 8.0, 6.4, 6.4, 6.4, 6.4, 6.4, 6.4, 6.4, 6.4, 6.4, 6.4 - Effective interest rate (percent): 8.1, 7.0, 7.6, 7.7, 7.8, 7.7, 7.8, 8.0, 8.2, 8.3, 8.4, 8.2 - Commentary: Public debt is on track to meet the debt target of 60 percent of GDP by FY2027/28, in accordance with the Fiscal Responsibility Law. The authorities have been proactive in reducing near-term financing needs through liability management operations, buybacks and maturity extension (by issuing 2045 bonds and a J$ denominated global bond to repay US$ denominated global bonds). However, debt dynamics remain vulnerable to uncertainties surrounding global shocks, natural disaster susceptibility, and the realization of contingent liabilities from public bodies. The authorities have large GFN needs in FY2024/25 and FY2028/29. ### Realism of baseline assumptions (Figure 3) — Findings - Commentary: 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. - Commentary: 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. - Commentary: In terms of realism of fiscal adjustments, 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. - Distribution notes (from charts): 3-year debt reduction above 75th percentile (5.9 ppts of GDP) percentile rank 87.2; 3-year adjustment above 75th percentile (2 ppts of GDP) percentile rank 37. ### Medium-term risk analysis (Figure 4) — Indices and probabilities - Debt fanchart module: - Fanchart width: 38.8 0.6 (percent of GDP) - Debt fanchart index (DFI): 1.2 - Risk signal: Moderate - Terminal debt-to-GDP x: 27.4 0.6 - Probability of debt non-stabilization (percent): 4.4 0.0 - GFN module: - Average baseline GFN (percent of GDP): 6.0 2.1 - Initial Banks' claims on the gen. govt (pct bank assets): 9.4 3.1 - Chg. In banks' claims in stress (pct banks' assets): 2.6 0.9 - GFN financeability index (GFI): 6.0 - Risk signal: Low - Medium-term index: Low risk / Moderate / Final assessment: - Prob. of missed crisis, 2024-2029, if stress not predicted: 9.1 pct. - Prob. of false alarms, 2024-2029, if stress predicted: 58.0 pct. - 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 (Figure 5) — Findings and scenarios - Overall risk indication: Moderate (long-term risk assessed to be moderate). - Customized scenario assumptions (2029–2033 to 2037 average): - Real GDP growth: 1.6% (medium-term extrapolation), 1.6% (2029), 2.0% (custom scenario) - Primary Balance-to-GDP ratio: 4.2% (medium-term extrapolation), 3.2% (2029), 1.0% (custom scenario) - Real depreciation: -2.4% (all listed scenarios) - Inflation (GDP deflator): 4.7% (baseline), 4.7% (2029), 5.0% (custom) - Commentary: Long-term risk is moderate. The large amortization module shows gradual declines in GFN and debt relative to GDP both under the baseline and customized scenarios. The customized scenario assumes real GDP growth of 2 percent, a GDP deflator of 5 percent, and a primary balance surplus of 1 percent of GDP. This primary balance surplus is significantly lower than the average of 6.6 percent recorded over the last ten years. - Pensions and demographics: - Commentary: Pension expenditures under the current system would lead to larger GFNs and cause a moderate rise in debt in the long run. This points to the need to undertake parametric reforms of the current public pension system. Actuarial reviews, scheduled to take place every three years, should continue to inform parametric reforms to the National Insurance Scheme to ensure that increased coverage does not compromise the fiscal sustainability of the National Insurance Scheme. Further, making parametric changes to the pension plan for public employees will help in reducing its financial burden on public finance going forward. - Health: - Commentary: Current health care expenditures would not pose significant sustainability concerns. A scenario of higher growth rate of healthcare costs (e.g., due to medical advances) suggests fiscal pressures that would prevent sustained declines in gross financing needs and public debt in the long run. - Climate change adaptation: - Commentary: Climate-related adaptation expenditures are manageable and would not significantly impact debt sustainability. The standardized and customized scenarios of the climate change adaptation module add costs associated with investments of 0.4 percent of GDP and 0.2 percent of GDP over the long run, respectively. ### External Debt Sustainability (Table 4 and Figure 6) - External debt (percent of GDP): - 2018: 85.8 - 2019: 82.6 - 2020: 103.8 - 2021: 92.6 - 2022: 78.8 - 2023: 72.3 - 2024: 65.1 - 2025: 59.9 - 2026: 56.3 - 2027: 53.7 - 2028: 51.0 - Debt-stabilizing non-interest current account: -2.7 (2028) - Change in external debt: -7.2, -3.2, 21.2, -11.2, -13.9, -6.5, -7.2, -5.2, -3.6, -2.7, -2.7 (2018–2028) - Identified external debt-creating flows (4+8+9): -6.6, 0.0, 10.2, -12.4, -18.1, -6.0, -4.7, -4.1, -3.3, -2.3, -1.9 (2018–2028) - Current account deficit, excluding interest payments: -1.0, -0.7, -1.1, -1.8, -4.0, -4.8, -3.1, -2.2, -1.5, -0.5, -0.2 (2018–2028) - Exports (percent of GDP): 38.1, 36.7, 19.9, 32.3, 39.2, 37.8, 38.0, 37.4, 37.3, 37.2, 37.0 (2018–2028) - Imports (percent of GDP): -51.6, -51.0, -41.7, -53.3, -55.6, -51.6, -51.7, -51.5, -52.0, -52.6, -52.8 (2018–2028) - Net non-debt creating capital inflows (negative): -4.2, -2.1, -3.8, -2.5, -1.8, -2.2, -2.5, -2.9, -3.0, -3.1, -3.1 (2018–2028) - Automatic debt dynamics: -1.4, 2.8, 15.1, -8.1, -12.3, 0.9, 0.8, 1.0, 1.2, 1.3, 1.4 (2018–2028) - Contribution from nominal interest rate: 2.5, 2.6, 2.3, 2.4, 2.1, 2.3, 2.0, 2.0, 2.2, 2.2, 2.2 - Contribution from real GDP growth: -1.7, 0.1, 0.5, -7.6, -3.7, -1.4, -1.1, -1.1, -0.9, -0.9, -0.8 - Residual, incl. change in gross foreign assets: -0.6, -3.2, 11.0, 1.2, 4.2, -0.5, -2.4, -1.0, -0.3, -0.3, -0.8 - External debt-to-exports ratio (in percent): 225.6, 224.9, 221.9, 286.6, 201.2, 191.1, 171.2, 160.1, 151.0, 144.4, 137.7 - Gross external financing need (in billions of US dollars): 2.3, 2.6, 2.1, 2.7, 2.1, 2.3, 2.6, 2.5, 2.9, 3.1, 3.0 (2018–2028) - Gross external financing need (in percent of GDP): 14.8, 16.3, 15.1, 18.1, 12.0, 10-Year 10-Year 11.7 12.6 11.6 13.0 13.3 12.6 (table formatting in source) - Scenario with key variables at their historical averages: 72.3, 69.4, 66.0, 62.6, 59.0, 55.0, -3.8 (selected years) - Key macroeconomic assumptions underlying baseline (selected): - Real GDP growth (percent): 1.9, -0.1, -11.0, 8.2, 4.7, 0.8, 4.9, 1.9, 1.7, 1.7, 1.6, 1.6, 1.6 - GDP deflator in US dollars (change in percent): 2.4, -0.2, -2.7, 2.9, 13.0, 1.4, 5.2, 6.7, 5.3, 2.7, 1.7, 1.8, 1.8 - Nominal external interest rate (percent): 2.8, 3.0, 2.5, 2.6, 2.6, 3.4, 0.9, 3.2, 2.9, 3.3, 3.7, 4.0, 4.3 - Growth of exports (US dollar terms, percent): 18.0, -3.7, -53.1, 81.0, 43.3, 9.9, 34.7, 5.1, 7.6, 2.8, 3.0, 3.1, 3.1 - Growth of imports (US dollar terms, percent): 8.9, -1.3, -29.3, 42.3, 23.5, 4.1, 19.8, 1.0, 7.3, 4.1, 4.3, 4.6, 3.8 - Current account balance, excluding interest payments: 1.0, 0.7, 1.1, 1.8, 4.0, 0.5, 2.5, 4.8, 3.1, 2.2, 1.5, 0.5, 0.2 - Net non-debt creating capital inflows: 4.2, 2.1, 3.8, 2.5, 1.8, 4.4, 2.3, 2.2, 2.5, 2.9, 3.0, 3.1, 3.1 - Figure 6 bound tests: - Interest Rate Shock, Current Account Shock, Growth Shock, Real Depreciation Shock scenarios shown against baseline with external debt in percent of GDP; combined shock and 30% depreciation scenarios raise debt significantly (chart annotations: Real Depreciation Shock 30% in 2023 results in peak external debt around 79 percent of GDP). ### Policy implications and recommendations (drawn from commentary) - Maintain fiscal consolidation consistent with meeting the debt target of 60 percent of GDP by FY2027/28, as mandated by the Fiscal Responsibility Law. - Continue liability management operations, buybacks and maturity extension to reduce near-term financing needs and lengthen maturity profiles. - Strengthen public finance data coverage and quality, expanding coverage to general government and improving reporting on intra-government debt holdings. - Prepare for natural disaster shocks and contingent liabilities from public bodies through fiscal buffers and contingency planning given the country’s natural disaster susceptibility. - Undertake parametric reforms to the public pension system and continue actuarial reviews every three years to ensure sustainability of the National Insurance Scheme and public employee pension plans. - Monitor health care cost growth and consider policy actions if higher healthcare cost growth scenarios materialize. - Advance development of the domestic debt market to reduce reliance on external currency debt and support medium-term decline in external debt share. *Source: IMF staff estimates and projections.* ### Annex III. RSF Reform Measures: Content and Impact ### Annex III. RSF Reform Measures: Content and Impact ### First Review — RM1: National Natural Disaster Risk Financing (DRF) policy (MOFPS) - Establishes a foundation for development of a strategic approach to disaster risk financing and operationalizes Jamaica’s Public Financial Management Policy for Disaster Risk. - Adopts a comprehensive financing approach including use of an expanded set of insurance instruments and enables identification and selection of the most cost-effective disaster risk insurance. - Rationale: Jamaica had a diverse set of financial coverage tools driven by opportune availability rather than strategy; NNDRFP was developed to deploy a robust assessment of explicit and implicit contingent liabilities matched against a suitable suite of financial tools. - Policy three focus areas: - i) budgeting for DRF – data processes & systems (improve budgeting and reporting of climate related expenses); - ii) building financial and disaster risk resilience (comprehensive financing approach and expanded insurance instruments); - iii) building institutional capacity (improve competence in identifying and quantifying fiscal risks, including contingent liabilities related to natural disasters, and strengthen capacity to evaluate alternative DRF instruments). - Complementary Implementation Plan identifies relevant parties and an operationalization/implementation schedule. - Informed by the World Bank’s 2018 report "Advancing Disaster Risk Finance in Jamaica" and World Bank technical support during preparation. ### First Review — RM2: Integrate climate requirements in PPP framework (DBJ in consultation with MOFPS) - Objective: Modify the Policy and Institutional Framework for the Public-Private Partnership (PPP) Program and revise the PPP Standard Operating Procedure Manual to include climate requirements across project lifecycle from project identification to contract management. - Rationale: PPPs used extensively since 2011 and are central for blending public and private resources to tackle climate-related investment needs; existing framework lacked a structure for allocation of climate risks and did not integrate climate-related analysis based on a standardized methodology. - Outcomes: - Policy amended to integrate climate-related analysis into PPP project appraisal, selection, procurement, and contract management procedures. - PPP Standard Operating Procedure Manual revised to operationalize climate integration across four PPP project phases: i) project identification; ii) business case; iii) transaction; iv) contract management. - Manual includes templates and guidance intended for Development Bank of Jamaica (DBJ), enterprises, financial institutions, and development organizations. - Technical assistance from the Inter-American Development Bank (IDB). - Impact: Transparent and up-front allocation of liabilities supports proper quantification of liabilities and securing of matching resources. - Box 1 — PPP Manual guidance by project phase (summary): - Project Identification: ensure projects align with GoJ development goals and think through high-level climate risk impacts (see: 2.1.1-2.1.3). - Business Case: embed climate resilience into technical, financial, economic, environmental analyses to determine PPP viability. - Transaction: embed climate resilience into contract design, bidder qualification, tendering, and bid evaluation. - Contract Management: decision support tools to track climate-related agreements and manage unforeseen climate-related risks over PPP life. ### First Review — RM8: Electric Vehicles Policy (EVP) submission to parliament (MSET) - Purpose: Establish functional standards/regulations for electric mobility, define energy sector guidelines, develop operational codes to promote EV adoption, and set guidelines to build an electric mobility ecosystem. - Rationale: Mass public transportation underdeveloped, over-reliance on cars/taxis, high per capita petrol consumption, high fuel import bill, and vulnerabilities (e.g., inflationary pressures following the war in Ukraine) — urgent need to transition to renewable energy. - Projected outcomes over the next decade: - share of electric vehicles rising to about 12 percent of total privately owned fleet; - 16 percent of public transport; - savings of 3 MTCO2eq. - Economy-wide and socio-financial impacts estimated as positive due to infrastructure investments, fuel import reductions, renewable development, and socio-financial (including health) savings from efficiency advantages in maintenance, emissions, and operations versus combustible-engine fleet. - EVP developed based on the Strategic Framework of Electric Mobility (SFEM, adopted March 2021) with IDB technical assistance. - EVP six building blocks: - i) establishment of different standards to enable electric mobility adoption (EV import standards, EV registration procedures, etc.); - ii) deployment of a public charging infrastructure network as prerequisite to engage on EVs (actual charging infrastructure investment expected to be undertaken by public and private stakeholders; JPS has been building charging stations); - iii) existence of a competitive EV infrastructure market; - iv) proper management of batteries and other EV components second-life and recycling at end-of-life; - v) promotion of specific training programs for technical experts and first responders to guarantee viability of EV deployment; - vi) social awareness campaigns to incentivize EV use (communication campaigns, test rides, etc.). - EVP complements existing fiscal incentives to stimulate EV purchase and expansion. ### First Review — RM9: Energy efficiency guidelines for schools, hospitals, and public buildings (MSET) - Objective: Approve guidelines adapted to type and purpose of structures to reduce energy use in existing and new schools, hospitals, and public buildings. - Impact on public finances and emissions: - Energy Efficiency and Conservation Program (2012-2016) retrofitted public buildings and is estimated to have saved 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: - Collate existing energy efficiency codes and standards into a centralized reference hub 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 of enhanced energy efficiency and define processes for new and existing structures. - Establish procedures for monitoring, evaluation, measurement, and verification of implementation. - Set specific energy efficiency requirements for hospitals and schools. ### Second Review — RM3: Climate impact assessment methodology in PIMS (PIAB) - Requirement: Define a methodology to conduct climate impact assessments at project appraisal stage and incorporate it in the Public Investment Management System (PIMS) handbook. - Contribution: Promotes a climate-resilient PIMS and mandates dissemination and mandatory use across government agencies preparing publicly funded investment projects via inclusion in PIMS handbook. - Addressed deficiency: Previous framework used CCORAL and climate impact assessments at concept/proposal stages without a uniform standard methodology. - Methodology features: - (i) identifies climate risks for capital projects through project lifecycle; - (ii) identifies climate risks’ data sources; - (iii) defines processes/procedures to integrate climate risk analysis in projects’ economic and financial analysis. - Focuses on exposure of projects to damage from climate-related disasters and applies to projects proposed by ministries, departments, agencies (MDAs), and public entities. - Any project not meeting the climate impact criteria will not be included in the project pipeline or selected for financing. - Informed by IMF’s 2023 Climate Public Investment Management Assessment (C-PIMA) and IDB technical assistance. - Availability: - Methodology available at: https://www.mof.gov.jm/wp-content/uploads/Climate-Risk-Assessment-Methodology-202312.pdf. - MOFPS issued a circular mandating use, available at: https://www.mof.gov.jm/wp-content/uploads/Circular-34-Climate-Risk-Assessments-Incorporated-into-the-Appraisal-of-Public-Investment-Projects.pdf. ### Second Review — RM4: Project selection criteria including climate change criteria (PIOJ) - Requirement: Define and publish project selection criteria including climate change criteria. - Contribution: Requires identification and publication of project selection criteria applicable to any project, and climate-related selection criteria, thereby improving consistency in project selection and climate resilience of PIMS. - Prior deficiency: Capital projects were not selected according to commonly applied and consistent project selection criteria, nor on consistent climate-related criteria. - Outcomes: - PIOJ developed project selection criteria including: - (i) description of institutional framework in charge of project selection and summary of process; - (ii) worksheet describing selection criteria and weights applied to each criterion; - (iii) detailed guidelines on application of selection criteria including software and guidance for use. - Selection criteria account for vulnerability of projects to climate hazards. - Informed by IMF’s 2023 C-PIMA and IDB technical support. - Availability: project selection criteria available at: https://www.pioj.gov.jm/government-of-jamaica-pims-project-selection-criteria/. ### Second Review — RM6: Establish National Natural Disaster Reserve Fund (NDRF) subaccount and financial regulations (MOFPS) - Actions: - Submit to parliament an amendment to the Financial Administration and Audit Act (FAA) to establish a National Natural Disaster Reserve Fund (NDRF) subaccount under the consolidated fund account. - Approve financial regulations for transparent administration and reporting of the NDRF. - Purpose: Complement RM1 by providing a budget account to receive and disburse resources to alleviate impact of catastrophic natural disasters; trigger use for catastrophic events exceeding damage threshold defined in amended FAAA. - Financial regulations specify roles, responsibilities, procedures, and criteria to channel resources to respond to disasters. Key elements include: - (i) definition of the fund’s administrative body; - (ii) identification of sources of financing and instructions for capitalization; - (iii) definition of scope and types of interventions that trigger financing by the NDRF; - (iv) timely fund disbursement procedures—in line with MOFPS’s 2019 post-disaster budget execution guidelines—to ensure resources are available timely and efficiently; - (v) mechanisms for tracking, accounting, and reporting of fund expenditures to ensure comprehensive and timely information for policymakers and the public. - Accounting: International Public Sector Accounting Standard (IPSAS) applied to the fund’s accounting. - Expected benefit: Increased transparency and confidence for international providers of financial assistance regarding intended use and accounting of funds. ### Second Review — RM10: BOJ climate risks assessment and embedding in supervision (BOJ) - Requirement: Publish a climate risks assessment (diagnostic of related climate and environmental risks detailing current governance and regulatory regime) and define a timeline to embed these risks in supervisory activities and related databases. - Purpose: First step to build capacity at BOJ and FSC to incorporate Climate-Related Financial Risks (CRFR) into risk-based supervision, risk monitoring, and evaluation. - BOJ report outputs: - (i) assesses climate risks in Jamaica distinguishing physical and transition risks; - (ii) investigates transmission channels of these risks into the financial system; - (iii) analyzes transmission channels in major economic sectors including agriculture, distribution, mining and manufacturing, tourism and transportation and energy; - (iv) reviews peer practices in managing climate-related financial risks and discusses current climate readiness of Jamaica’s financial sector and national policies/regulatory framework; - (v) provides recommendations for BOJ and the financial sector to enhance climate readiness. - Timeline to embed climate risks in supervisory activities (itemized in Table 16 of BOJ report) includes, among others: - (i) initiate enhanced data collection and reporting frameworks relating to climate-related financial risks (early 2024); - (ii) adopt a monitoring framework that improves data collection and establishes reporting requirements for financial institutions (end-June 2024); - (iii) conduct early climate stress testing exercises (end-2025); - (iv) BOJ to become a full member of the NGFS secretariat and arrange bilateral meetings with peer supervisors to discuss climate risk management, climate disclosures and climate stress testing (end-2024); - (v) develop an own TCFD report (mid-2024). - Support: BOJ received support from the Agence Française de Développement (AFD) to develop the report. - Report availability noted as: https://e2gobqetsqs.exactdn.com/wp-content/uploads/2023/12/Climate-Risks-Report.pdf. *Annex III. RSF Reform Measures: Content and Impact* ### 9. RM5: The MOFPS to conduct and publish in the Fiscal Risk Statement quantitative ### 9. RM5: The MOFPS to conduct and publish in the Fiscal Risk Statement quantitative analysis of the fiscal risks generated by climate change. ### RM5: Purpose and methodology - RM5 contributes to a climate resilient fiscal framework by operationalizing a methodology to quantify climate impact on fiscal risks. The requirement to incorporate the methodology in the Fiscal Risk Statement (FRS) in The Policy Paper assures dissemination and mandatory use of the methodology at the most important moment in the budget preparation process. - The methodology: - (i) identifies the climate risks through the lifecycle of the MTFF; - (ii) identifies the climate risks’ data sources; and - (iii) defines processes and procedures to integrate climate risks analysis in the FRS. - Focus: past exposure to damage from climate-related disasters and calibration of these estimates for the forecasted FRS. - Implementation note: Building capacity in data collection is the first step for conducting climate risk stress tests; identification and collection of climate data is a complex process requiring collaboration between climate scientists and financial sector experts. ### RM5: External inputs and institutional synergies - RM5 was informed by: - World Bank’s 2018 report “Advancing Disaster Risk Finance in Jamaica’’ quantifying the fiscal disaster losses. - IMF’s Climate Public Investment Management Assessment (C-PIMA) and IMF FAD technical support (Fiscal Risks from Climate Change, Fisher L., October 2023). - C-PIMA finalization: early 2023, identifying areas to increase resilience of public investment to climate change. - Reference link noted in source: MOFPS FPP 2024 available at: https://www.mof.gov.jm/wp-content/uploads/FPP-2024-Final.pdf. ### RM7: Personal income tax rebates for residential solar (bill submission and enactment) - Objective: incentivize investment in renewables through fiscal measures (personal income tax rebates to incentivize take up of solar panels for residential generation). - Development: measure developed in-house, informed by experiences in Barbados, Trinidad and Tobago, and the United States. - Legislative status: - Bill passed by parliament on July 9, 2024. - Rebates shall apply to solar panels acquired and installed on or after January 1, 2023. - Context: complements existing incentives: - zero-rated VAT for inputs/raw materials for manufacture of solar and wind equipment; - suspension of the import duty for items on the priority list of renewable energy and energy efficiency until end-2025; - favorable tariffs for imports of EVs; and net billing. - Additional measure: amendment reducing corporate income tax rate from 33 1/3 to 25 percent for independent power producers generating at least ¾ of energy from renewable sources (tabled in June). - Fiscal impact estimate: - Authorities estimate potential revenue loss from the measure at approximately J$ 100 million. - Volume of 2023 Net Billing applications used to approximate demand for residential solar panels due to the income tax credit. - Strategic linkage: deepens synergies with the WB’s 2021 “Jamaica’s Long-Term Climate Change Strategy Recommendations”. ### RM11: Monitoring framework, data collection, and climate-related financial risk stress testing - Objective: 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 the BOJ to gradually integrate climate risks in supervision and macroprudential policy formulation. - Relationship to RM10: RM11 complements RM10 (completed in December 2023); RM10 was the first step to build capacity at the BOJ and the FSC to incorporate Climate-Related Financial Risks (CRFR) into supervisory and monitoring practices. - Planned activities: - increase collaboration between climate scientists and financial sector experts to operationalize climate-related stress tests; - conduct climate-related stress tests; - develop a monitoring framework to manage risks; - build capacity at the BOJ and the FSC for ongoing assessment of climate-related risks. - Timeline and deliverables: - Data collection process to commence early in 2025 with development of new collection forms and expansion of existing forms expected by end-March 2025. - Consultation and refinement of the framework through stakeholder engagement to proceed in parallel. - Framework expected to be finalized and training rolled out by mid-2025. - First cycle of data submission expected by end-September 2025. - Continual review and adjustment of the framework and submission practice to be completed by end-2025. - BOJ expects to launch a climate risk data dashboard on its website by end-March 2026. - Identified data gaps: - company specific financial and production data; - sector-specific data accounting for varying vulnerabilities (energy sector exposure to transition risks vs. agricultural sector exposure to physical risks); - detailed locational and physical attribute data; - emissions data in Jamaica. - Expected uses and benefits: - climate risk reports to feed quantitatively and qualitatively into the Supervisory Review and Evaluation Process assessment; - stress test results to shape macroprudential policies, improve risk management practices, inform disclosure and reporting standards, and raise awareness of risk and adaptation needs in the financial sector; - intersection of top-down climate stress tests with bottom-up tests developed by financial institutions to allow comprehensive assessment of institutional preparedness. - Support and feasibility: - BOJ received support from Agence Française de Développement (AFD) to develop RM11. - RM11 recognized as a high feasibility, high urgency measure; project “Assessing Climate Related Risks in the Jamaican Financial System” launched in 2022 with AFD assistance. ### RM12: Institutional framework for green-bond issuance and trading - Objective: establish an institutional framework for green-bond issuance and trading to mobilize private sector financing for climate adaptation and emission reduction projects and signal commitment to address climate change. - Availability: guide for green bond issuance available on the Jamaica Stock Exchange website at https://www.jamstockex.com/investors/green-bonds/ - Financing support and linkage: - RM12 builds on a 2019 Green Climate Fund (GCF) Readiness Grant (LAC-RS-003) of US$0.6 million (“Towards a comprehensive national adaptation planning process in Jamaica” PIOJ, 2020, p. 6). - RM12 recognized as a high feasibility measure and deepens synergy with that project. ### Annex IV: Summary of PLL Qualification Assessment — selected indicators and values - Capital account dominated by private flows (share of private flows in total capital flows >50 percent, average over last three years): - 75 percent; 66 percent; 66 percent; 80 percent - Track record of steady sovereign access to international capital markets (public sector bonds issued or loans disbursed in international markets in at least 3 of the last 5 years; cumulative amount during the last 5 years>50 percent of the country’s quota at the Fund): - 158 percent of quota; 158 percent of quota; 218 percent of quota 1/; 218 percent of quota 1/ - Comfortable international reserve position (reserves>100 percent of ARA metric, on average over three years): - 117 percent; 114 percent; 95 percent 2/; 95 percent 2/ - Inflation (low and stable; single digits in the last 5 years preceding qualification): - 6.1 percent; 6 percent; 7 percent; 7 percent - Banking sector capital adequacy ratio and solvency (regulatory threshold for capital adequacy is 10 percent): - CAR at 14 percent. No significant solvency risks or recapitalization needs. - CAR at 14.2 percent. No significant solvency risks or recapitalization needs. - CAR at 14.5 percent. No significant solvency risks or recapitalization needs. - CAR at 14.6 percent. No significant solvency risks or recapitalization needs. - Notes in annex: - 1/ Further issuances were not needed given low financing needs. - 2/ The indicator in the 2nd PLL review uses the ARA metric for floating countries for the year 2021 and for non-floating countries for the years 2022 and 2023, following the re-classification of the de-facto exchange rate regime, starting July 2022. *Source: 1jamea2024002-print-pdf - 9. RM5: The MOFPS to conduct and publish in the Fiscal Risk Statement quantitative* ### 6. In line with our commitments in our previous written communication, policies under the PLL ### 1jamea2024002-print-pdf - 6. In line with our commitments in our previous written communication, policies under the PLL ### AML/CFT reforms and FATF outcomes - Addressed remaining vulnerabilities in the AML/CFT regime in line with the action plan agreed with FATF, enabling Jamaica to be removed from the increased monitoring list. - FATF June Plenary welcomed "significant progress" and noted strengthened effectiveness meeting commitments regarding the strategic deficiencies identified in February 2020. - The action plan completed commitments on 13 actions in five areas rated at moderate/low effectiveness in the 2017 Mutual Evaluation Report: - i) completion and dissemination of a National Risk Assessment (NRA); - ii) adoption of risk-based supervision (RBS), monitoring and regulation of financial institutions (FI) and the Designated Non-Financial Businesses and Professions (DNFBP) compliance with the AML/CFT framework; - iii) preventing misuse of ML/TF by legal persons and ensuring availability of beneficial ownership (BO) information to competent authorities; - iv) investigation and prosecution of ML offences and application of effective, proportionate and dissuasive sanctions; - v) addressing technical deficiencies related to targeted financial sanctions (TFS) for terrorist financing, ensuring timely implementation of TFS, issuing regulations for monitoring non-profit organizations (NPO), and applying targeted measures to higher risk NPOs. - Commitment: continue improving the AML/CFT regime in preparation for the 5th round mutual evaluation scheduled for June 2026. - Procurement transparency measure: plan to reform regulations to require collection and publication on the Ministry of Finance website of beneficial ownership information of awarded companies; first step—published ownership information for companies awarded COVID-related contracts. ### Financial supervision, Basel III adoption, and regulatory perimeter - Phase I milestone: publication of the Standard of Sound Practice for Capital Adequacy (SSP) setting minimum capital requirements under Pillar 1 and revised regulatory capital definition. - Ongoing work: implementation of Pillars 2 and 3 and converting SSP into a capital adequacy regulation. - Phase II (Pillar 2) scope: - Internal Capital Adequacy Assessment Process (ICAAP); - Supervisory Review and Evaluation Process (SREP); - framework for designating Domestic Systemically Important Financial Institutions (D-SIFIs); - execution of quantitative impact studies (QIS) by licensed DTIs. - Phase III (Pillar 3) scope: - market disclosures, consultation and implementation of additional capital and liquidity measures—including capital buffers and the Net Stable Funding Ratio (NSFR). - Regulatory perimeter expansion: - Amendment to the Co-operative Societies Act to bring credit union cooperatives under the regulatory perimeter of the Ministry of Finance and the BOJ; bill to be presented to Parliament in 2024 jointly with the proposed Credit Unions (Special Provisions) Act covering licensing, capital, reserves, prohibited business, and intervention processes. - Strengthening the regulatory framework (selected actions): - a. Special Resolution Regime (SRR) Bill submitted to parliament in June (fulfilment of the PLL structural benchmark). - b. Published methodology to identify systemically important (bank and non-bank) financial institutions (Structural Benchmark, end-September 2023). - c. Financial Holding Companies (FHCs): Banking Services Act requires financial groups with DTIs to establish an FHC to be licensed and supervised by the BOJ. In May 2021 the BOJ granted the first FHC license; since then BOJ has licensed 5 of 8 FHCs and commenced monitoring of all licensees; regional Consolidated Supervision Group established in 2021. - d. Financial Services Commission (FSC): launched a risk-based supervision framework in November 2021; amendment to the FSC Act tabled in Parliament to enhance consolidated supervision (Structural Benchmark, end-September 2023); goal to implement a unified prudential regulatory structure by fall of 2025. - e. Longer-term reform: consider unified prudential supervision under the BOJ; in the short term FSC will continue to supervise non-bank financial system and will focus on market conduct and consumer protection when reform is complete. Fund’s MCM conducted a scoping mission in May 2023; World Bank providing technical support on market conduct and consumer protection framework design. ### Data, statistics, and SDDS subscription - Continued improvements: national accounts and price statistics (rebasing and methodology update, updated Household Expenditure Survey), government finance statistics, monetary and financial statistics, and balance of payments with support from CARTAC and the Fund’s Statistics Department (STA). - Participation history: GDDS since 2003; implemented e-GDDS in 2017. - Plan to subscribe to the SDDS; PLL-facilitated progress toward subscribing by mid-2025. - IMF STA Special Data Dissemination Standard Assessment mission: May 1-12, 2023; worked with a committee from MOFPS, BOJ, and STATIN (Structural Benchmark, end-March 2023) to define an action plan. - Three high-priority structural benchmarks under the PLL (status met): - (i) BOJ’s compilation and presentation to the Fund’s Statistics Department of the International Reserve and Foreign Currency Liquidity (IRFCL) template data for August 2023 was met by end-September 2023. - (ii) MOFPS’ dissemination on the National Summary Data Page (NSDP) of the compiled data for general government operations for fiscal years 2021/22 and 2022/23 was met by end-March 2024. - (iii) BOJ conducting the Non-Financial Corporation Survey to obtain data for Direct Investment Intercompany Lending positions for each quarter of 2023, improving external sector data, was met by-end June 2024. - Additional high-priority actions will be implemented beyond the program’s expiration date. ### Fiscal framework, procurement, and public financial management - Continued work on fiscal policy framework to preserve fiscal and debt sustainability. - Intend to continue improving regulations to the 2018 Procurement Act to enhance transparency, improve governance, and limit vulnerability to corruption. - Published audit and contract data: Auditor General’s Department audit reports on COVID-related programs and integrity commission database listing contracts since 2006 referenced in-footnote. ### Climate resilience, RSF reforms, and green finance - Rationale: Jamaica has low carbon emissions but high vulnerability to climate change—exposed to higher temperatures, sea level rise, and more frequent natural disasters (droughts, hurricanes, storms, and floods). - RSF role: instrumental to implement reforms strengthening resilience and integrating climate agenda into macroeconomic policy; concessional resources and RSF reforms aim to catalyze private sector financing. - Climate agenda objectives: - Transition to renewables in electricity generation; - Enhance policy frameworks to scale up infrastructure investment and catalyze private financing for climate issues; - Strengthen financial resilience and “green” the financial system with sound monitoring during the economy’s transition. - Specific climate targets and reforms: - Aim to convert about half of total electricity generation capacity to renewables by 2030. - Incentivize investment in renewables, invest in climate resilient infrastructure, and adopt a layered financial framework supporting relief and reconstruction while safeguarding public finances. - Link to Updated Nationally Determined Contribution (NDC) decarbonization efforts. - RSF three pillars and accomplishments: - First pillar (adaptation/resilience): - Reformed PPP policy to include climate requirements and revised the PPP Standard Operating Procedure Manual; - Adopted a National Natural Disaster Risk Financing (DRF) policy; - For second review: adopted methodologies for climate risk assessments at project appraisal, incorporated into PIMS handbook; defined and published project selection criteria including climate change criteria; tabled in parliament an amendment to the Financial Administration and Audit Act to establish a National Natural Disaster Reserve Fund (NDRF). - Financial regulations for transparent administration and reporting of the NDRF drafted, reviewed by Attorney General’s Chambers and approved by the Ministry of Finance and the Public Service. - NDRF established with a minor deviation—as a separate account alongside the consolidated fund account rather than as a subaccount of the consolidated fund—to assure timely disbursement in response to a qualifying natural disaster. - For this review, conducted and published in the Fiscal Risk Statement quantitative analysis of fiscal risks generated by climate change. - Second pillar (mitigation/decarbonization): - First review: adopted and submitted to parliament for information an electric vehicle policy setting functional standards and regulations, energy sector guidelines, operational codes, and guidelines for electric mobility ecosystem; approved guidelines to reduce energy use in public buildings. - Current review: submitted to parliament a bill to further incentivize investment in renewables through fiscal measures. - Third pillar (greening the financial system): - Second review: published a climate risks assessment with diagnostic of climate and environmental risks and defined a timeline to embed measurement of these risks in supervisory activities and related databases. - For this review: adopted 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; - Established an institutional framework for green-bond issuance and trading to open new avenues for private climate-related financing. - Complementarity: RSF agenda and Updated NDC mutually reinforce each other; commitment to share lessons learned across institutions to improve future climate resilience work. ### Program monitoring, commitments, and outlook - Continued presentation of relevant information to the IMF under the Fund’s Articles of Agreement; compliance with 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. - Provided the Fund with all needed information to monitor the PLL and RSF arrangements. - Assessment: policies in this communication considered adequate for achieving PLL and RSF economic goals; committed to take additional measures if necessary. - Expectation: continue treating the PLL as precautionary; Jamaica is expected to be in a strong position to exit the PLL by early-2025 as external risks subside and external buffers continue to grow. *Source: Government of Jamaica communication under the PLL and RSF arrangements as presented in the cited PDF chapter.* ### 22. Finally, we authorize the IMF to publish this statement, its attachments, and the staff report ### 22. Finally, we authorize the IMF to publish this statement, its attachments, and the staff report for this review in line with the commitment to transparency. ### Authorization and signatories - Statement authorized for publication by: - Nigel Clarke, DPhil., MP — Minister of Finance and the Public Service (signed) - Richard Owen Byles — Governor, Bank of Jamaica (signed) ### PLL Quantitative Targets (Table 1: selected figures) - Overall Fiscal Balance of the Central Government (floor)1/: - March 31, 2023 Target: J$7,506 million - March 31, 2023 Adjusted: J$7,506 million - March 31, 2023 Actual: J$7,786 million - Sept. 30, 2023 Target At Program Approval: J$3,625 million - Sept. 30, 2023 Adjusted: J$-45,083 million - Sept. 30, 2023 Actual: J$-45,083 million - March 31, 2024 Target At 1st Review Revised: J$-27,675 million - March 31, 2024 Adjusted: J$8,249 million - March 31, 2024 Actual: J$8,249 million - Indicative Target Proposed At 1st Review: J$8,249 million - Indicative Target Adjusted: J$1,172 million - Net International Reserves (floor): - March 31, 2023 Target: US$3,535 million - March 31, 2023 Adjusted: US$3,535 million - March 31, 2023 Actual: US$4,147 million - Sept. 30, 2023 Target At Program Approval: US$3,620 million - Sept. 30, 2023 Adjusted: US$3,820 million - Sept. 30, 2023 Actual: US$3,820 million - March 31, 2024 Target At 1st Review Revised: US$4,718 million - March 31, 2024 Adjusted: US$3,930 million - March 31, 2024 Actual: US$4,400 million - Indicative Target Proposed At 1st Review: US$4,399 million - Indicative Target Adjusted: US$5,138 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: measures, timing, status) - Data Adequacy - A. Establish National Statistical Committee (BOJ, MFPS, STATIN) to approve Action Plan to Subscribe to the SDDS; monitor implementation. - Timing: March 31, 2023 - Status: Met - B. BOJ to compile and submit IRFCL template data for August 2023 to Fund’s Statistics Department. - Timing: September 30, 2023 - Status: Met - 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: Met - 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: Met - Financial Regulation - A. Submit Special Resolution Regime law to parliament to strengthen resolution of non-viable financial institutions, protecting stability and public funds, in line with Fund staff recommendations. - Timing: June 30, 2024 - Status: Met - B. Publish BOJ consultation paper methodology to identify systemically important (bank and non-bank) financial institutions and identify such institutions. - Timing: September 30, 2023 - Status: Met - 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: Met - Financial Integrity - A. Submit to Parliament an amended Companies Act to ensure: (i) definition of beneficial ownership aligned with FATF standards; (ii) effective, proportionate, and dissuasive sanctions for legal persons and legal arrangements breaching BO obligations; and (iii) Registrar of Companies granted powers to ensure compliance, monitor and verify that basic and BO information is accurate and timely updated. - Timing: March 31, 2023 - Status: Met ### Reform Measures under the RSF (Table 3: RM summary, timing, status, TA) - 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 Date: 1st PLL Review (End-June 2023) - Status: Met - TA: World Bank - RM2: Development Bank of Jamaica (DBJ) with MOFPS to modify PPP policy to include climate requirements and revise PPP SOP Manual. - Target Date: 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 Date: 2nd PLL Review (End-Dec. 2023) - Status: Met - TA: IDB - RM4: PIOJ to define and publish project selection criteria including climate change criteria. - Target Date: 2nd PLL Review (End-Dec. 2023) - Status: Met - TA: IDB - RM5: MOFPS to conduct and publish in the Fiscal Risk Statement quantitative analysis of fiscal risks generated by climate change. - Target Date: 3rd PLL Review (End-March 2024) - Status: Met - TA: IMF - RM6: MOFPS to submit to parliament amendment to the Financial Administration and Audit Act to establish a National Natural Disaster Reserve Fund (NDRF) subaccount and approve financial regulations for transparent administration and reporting of the NDRF. - Target Date: 2nd PLL Review (End-Dec. 2023) - Status: Met with minor deviation - TA: N/A - Pillar 2: Strengthening Mitigation/Promoting Renewables - RM7: MOFPS to submit to parliament a bill to incentivize investment in renewables through fiscal measures. - Target Date: 3rd PLL Review (End-June 2024) - Status: Met - TA: N/A - RM8: MSET to submit to parliament the electric vehicle policy, in line with objectives in paragraph 23 of the Written Communication. - Target Date: 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 Date: 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, governance and regulatory regime) and define timeline to embed these risks in supervisory activities and related databases. - Target Date: 2nd PLL Review (End-Dec. 2023) - Status: Met - TA: French Dev. Agency - RM11: Adopt 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 gradually integrate climate risks in supervision and macroprudential policy formulation. - Target Date: 3rd PLL Review (End-June 2024) - Status: Met - TA: (not specified) - RM12: Establish institutional framework for green-bond issuance and trading. - Target Date: 3rd PLL Review (End-June 2024) - Status: Met - TA: IDB - Note: The reform measures were discussed with IDB’s and World Bank’s experts to deepen synergies. ### World Bank Assessment Letter Update for the RSF (key points) - General - This update to the RSF Assessment Letter—Jamaica (dated February 15, 2024) highlights relevant changes since the first Assessment Letter. - A. Country vulnerability - 1. No updates since the last assessment letter. - B. Government policies and commitments: climate change adaptation - 2. BOJ completed a roadmap to enhance oversight of climate-related risks in the banking sector; roadmap published in December 2023. BOJ plans to require financial institutions to report periodically their climate risk exposures. - 3. DBJ is planning to establish a green blue finance facility (working title: Green/Blue Facility) to: (1) scale financing provided by DBJ for green/blue projects by private companies and public-private partnerships; and (2) create a resource mobilization platform to raise resources from international finance institutions, concessional finance, and private investors. - 4. Bureau of Standards Jamaica (BSJ) approved updates to strengthen Fire Code, Building Code and Small Building/Residential Code; updates aligned with international standards to increase climate and disaster resilience. Codes published in the Jamaica Gazette (final step for statutory approval). - C. Government policies and commitments: mitigation and GHG reductions - 5. Government increased renewable energy share target in Integrated Resource Plan I (2018) from 20 percent to 50 percent by 2037. In 2023, the Generation Procurement Entity (GPE) launched first round of RE tenders for 100 MW, with bid submission deadline April 5, 2024. GPE received 12 bids and is in evaluation stage, with expected award announcement by mid-Q3 2024. Plans underway for a second, technology-agnostic tender for 168 MW that will encompass energy generation and storage, planned for Q4 2024. - D. Other challenges - 6. No updates since the last assessment letter. - E. World Bank engagement - 7. Government requested World Bank to prepare a Development Policy Financing with a Catastrophe-Deferred Drawdown Option (Cat DDO) to strengthen disaster risk management capacity and build fiscal and financial buffers. The operation is under preparation and is expected to support reforms to strengthen enabling environment for private sector development, enhance adaptation to disasters, and facilitate green low-carbon transition. The Cat DDO pillar will anchor a forward-looking program of policy actions and provide access to crisis toolkit enhancements. The operation is expected to have synergies with the IMF RST program, including reforms to incentivize investment in renewables, expand financial protection against disasters, and strengthen financial system resilience against climate risk. *Source: IMF staff and World Bank assessment content as presented in the provided text.* --- _Source: https://www.imf.org/-/media/files/publications/cr/2024/english/1jamea2024002-print-pdf.pdf_