## _cr16350

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---

### Executive summary — context, progress, and remaining challenges
- Program: current 4-year Extended Arrangement under the EFF expires in April 2017; authorities request cancellation and a new 36-month Stand-By Arrangement (SBA).
- Program achievements:
  - Inflation and the current account deficit at historical lows; international reserves have more than doubled.
  - Reopening of the 2039 global bond at 6.75 percent.
  - Access to domestic and international financial markets restored; upgrades in credit ratings and high business confidence.
  - Financial sector resilience strengthened (including shifting retail repo transactions of securities dealers to a trust-based framework).
- Remaining challenges:
  - Real GDP growth averaged about 0.6 percent during the extended arrangement.
  - Unemployment: 13.7 percent.
  - Poverty: one-fifth of the population.
  - Wages account for one-third of public expenditures; capital spending is 7 percent and social spending is less than 3 percent of total spending.
  - Public debt remains high and has a high foreign currency composition.
  - High cost of financing for private capital formation.
  - Crime (homicide, burglary, robberies) imposes sizable costs.
- Authorities’ SBA request and modality:
  - Precautionary 36-month SBA with access equivalent to SDR 1.1953 billion (312 percent of quota, or about US$1.7 billion).
  - Initial tranche proposed at approval: SDR 300.1 million (78 percent of quota).
  - SBA nearly doubles the Fund’s commitment to Jamaica; semi-annual reviews.

### Outlook and key macroeconomic projections
- Near-term growth:
  - Real GDP growth: FY2015/16 = 1 percent; Q1 FY2016/17 = 1.4 percent.
  - Projected FY2016/17 growth: 1.7 percent.
- Medium-term growth: projected to rise to around 2.8 percent.
- Inflation:
  - 1.9 percent y/y in September (year stated in source).
  - Projected to return to 5.5 percent over the medium-term (BOJ target range 4.5–6.5 percent).
- Credit and monetary conditions:
  - BOJ policy rate lowered by 25 bps in May; cumulative cut of 75 basis points since April 2015.
  - Credit to the private sector grew at around 14 percent y/y in August 2016.
- Financial sector (as of June 2016):
  - Banks’ non-performing loans: 3.5 percent of total loans.
  - Provisioning: 111 percent.
  - Banking system CAR: 14.5 percent (regulatory minimum 10 percent).
- External sector and reserves:
  - External current account deficit fell to 1.8 percent of GDP in FY2015/16.
  - Net international reserves (NIR) were US$2.5 billion at mid-October, covering 5.8 months of imports of goods.
  - BOJ expected to build reserves to reach 90 percent of the ARA metric by end-2017, rising to 100 percent by 2019.
  - Current account deficit expected at around 3-3½ percent of GDP.
- Exchange rate and external position:
  - Real exchange rate depreciated by 6.6 percent during the first half of 2016.
  - Jamaica’s international investment position: -140 percent of GDP.

### Key baseline macro variables (selected)
- Real GDP growth (%): 1.7, 2.1, 2.5, 2.7, 2.8, 2.8.
- CPI Inflation (average, %): 2.9, 5.2, 5.5, 5.5, 5.5, 5.5.
- Primary balance (% GDP): 7.0, 7.0, 7.0, 7.0, 6.5, 6.5.
- Public Sector Debt (% GDP): 118.3, 110.8, 105.3, 95.8, 88.0, 82.2.
- Current account balance (% GDP): -2.8, -2.8, -2.8, -2.9, -3.3, -3.6.
- FDI, net (% GDP): 5.9, 4.5, 4.2, 4.2, 4.2, 4.2.
- Gross international reserves (US$ mn): 3,129; 3,596; 3,933; 3,973; 4,115; 4,143.
- Net international reserves (US$ mn): 2,536; 3,019; 3,419; 3,556; 3,815; 3,967.

---

### Medium-term fiscal anchor, tax reform, and public spending
- Fiscal anchor:
  - Target: reduce public debt-to-GDP to 60 percent by 2025/26.
  - Mechanism: reinvigorate growth and maintain a primary surplus of 7 percent of GDP during the program period.
- Tax policy:
  - Rebalance from direct to more growth-friendly indirect taxes (MEFP ¶9).
  - Personal income tax (PIT) changes:
    - Phase I (July 2016): exemption threshold increased from J$592,800 to J$1 million.
    - Phase II (planned by April 2017): increase from J$1 million to J$1.5 million (at a cost of 0.8 percent of GDP).
  - Property taxes: recalibrated rates and bands using 2013 valuation (structural benchmark end-December 2016).
  - Examine structure of financial sector taxation to reduce distortionary transaction taxes.
- Wage bill and spending reorientation:
  - Current wage bill: 10 percent of GDP.
  - Near-term target: achieve a wage bill of 9 percent of GDP by FY2018/19 and a downward path thereafter (¶17).
  - Maintain primary surplus at 7 percent of GDP to create space for capital and social spending.
- Public pension reform (draft bill elements):
  - Raise retirement age to 65.
  - Require a 5 percent mandatory contribution.
  - Expand benefit assessment to the last 5 years.
  - Reduce commutation benefit and lower replacement rate.
  - Fiscal impact: could yield annual gains of up to 0.5 percent of GDP in the medium to long term.

### Social safety net and PATH protections
- Poverty: around 20 percent since 2012; significant share of poor outside the social safety net.
- Authorities’ commitment:
  - Increase expenditures on PATH conditional cash transfers and the school feeding program in FY2017/18 budget by at least the amount necessary to fully shield the bottom quintile from adverse effects of tax changes (MEFP ¶6).
  - Medium-term: review programs, implement graduation strategies, improve monitoring and evaluation (including national ID).
- PATH program figures:
  - PATH cash transfers: ¼ percent of GDP; benefits to 350,000 individuals.
  - School feeding program: ¼ percent of GDP; at least three meals a week to approximately 389,000 school children (200,000 are PATH beneficiaries).
  - PATH benefits range from J$1,000 to J$1,725 per compliant beneficiary per month.
  - Coverage in bottom decile: 58 percent; coverage among persons with disabilities in bottom decile: 10 percent.
- Composition of social welfare expenditures (% total = 0.77% GDP):
  - PATH (cash benefits) 34%
  - School feeding program 30%
  - Institutional care 23%
  - Active labor market policies 7%
  - Other 6%

---

### Monetary policy, BOJ reforms, and reserves strategy
- Objective: strengthen monetary operations to facilitate a move to inflation targeting.
- Monetary targets and consultation clause:
  - Inflation center target: 5.5 percent.
  - June/December 2017 test dates: band 5.5 percent +/- 3.5 percent; narrows thereafter to 5.5 +/- 2.5 percent (asymmetric for December 2016: 5.5 +3.5/-4.5).
  - BOJ to make the overnight rate its operational policy rate by June 2017.
- Operational reforms:
  - Transition policy rate from 30-day CD to overnight rate; narrow interest rate corridor; use fixed-volume auctions for sterilization; improve liquidity forecasting with AGD.
  - Promote BOJ operational autonomy: ensure adequacy of BOJ balance sheet; submit revisions of the BOJ Act to Parliament (structural benchmark end-September 2017).
  - Strengthen inflation forecasting tools with IMF technical support.
- Exchange rate and FX operations:
  - Institute a multiple-price FX auction to buy and sell FX; phase-out surrender requirements as auctions become effective; auctions could be replaced by an interbank market when deep enough.
  - MCP risk: multiple-price auction could, in theory, generate two winning bids more than 2 percent apart; authorities requested Executive Board approval for temporary retention should auction give rise to a MCP.
- Reserves targets and composition:
  - Current NIR: US$2.5 billion, with around US$1 billion borrowed from local banks via BOJ US$-denominated CDs (maturities up to 7 years).
  - Policy: continue accumulating NIR through market purchases while reducing the share of borrowed reserves.
  - Targets: gross reserves reach at least 100 percent of the ARA metric by end of program; increase share of non-borrowed reserves in NIR from about 60 to nearly 80 percent by end of program.
  - Program targets set in terms of stock of non-borrowed NIR.
- Specified program monetary targets (stock of non-borrowed NIR, in millions of U.S. dollars):
  - End-Dec: 1,428
  - End-Mar: 1,475
  - End-June: 1,521
  - End-Sep: 1,637
  - End-Dec: 1,777

---

### Financial sector resilience, securities dealers, and inclusion
- Immediate priorities and structural benchmarks:
  - Operationalize Financial System Stability Committee by appointing two external members (structural benchmark end-November 2016).
  - Strengthen the resolution framework; release consultation paper (structural benchmark end-February 2017).
  - Ensure full compliance with MRRA for retail repos (structural benchmark end-May 2017).
- Securities dealers industry measures and timetable:
  - Stress test submissions starting in December 2016.
  - Introduction (April 2017) and full implementation (April 2019) of leverage and liquidity ratio requirements.
  - Stricter limits on single counterparty exposure (April 2019).
  - Restrictions on early encashment from retail repo instruments (April 2017).
- Medium-term priorities:
  - Strengthen depositor protection and supervision of credit unions.
  - Establish regulatory regime for financial holding companies.
  - Implement risk-based supervision for insurance companies and securities dealers.
  - Improve AML/CFT implementation, including for money service business sector.
  - Address high and rising dollarization with macroeconomic and macro-prudential policies.
- Financial inclusion strategy:
  - Create Financial Inclusion Council (structural benchmark end-March 2017).
  - Accelerate land titling and collateral registry, develop agency banking, mobile money, factoring, leasing, expand partial guarantee program, table Micro Credit Act.

---

### Public debt, debt management, and market development
- Debt-reduction path and fiscal stance:
  - Maintain primary surplus at 7 percent of GDP during arrangement to reduce public debt to 60 percent of GDP by 2025/26.
- Debt dynamics and DSA highlights:
  - Public debt fell by about 20 percent of GDP to 120 percent of GDP between FY2013/2014 and FY2015/16.
  - Under baseline, public debt projected to 96 percent of GDP at end-March 2020.
  - Government fully financed for 2016/17; domestic bond issuances used to prefinance large 2017/18 maturities.
  - Buyback of PetroCaribe debt in July 2015 reduced public debt by 10 percent of GDP upfront.
- Debt management reforms:
  - Enhance MOF–BOJ coordination to avoid competition between debt and monetary policy objectives.
  - Joint strategy for large domestic maturities, including possible liability management operations (LMOs).
  - Re-introduce auction-based mechanism for primary issuances; upgrade primary dealer system to include market-making obligations.
  - Revise collateral policy for liquidity provision (amend BOJ Act) to better reflect risk and market value, increasing collateral value of T-bills and BOJ CDs.
- External debt and FX exposure:
  - External debt estimated around 68 percent of GDP in FY2016/17; foreign-currency denominated debt about 61 percent of total debt.
  - Successful international bond buyback in August reduced upcoming external repayments in 2017/18-2019/20 by about $780mn.

---

### Risks, adverse scenario, and stress test outcomes
- Downside growth risks:
  - Without private sector-led growth and improved business environment, achieving growth above 2 percent is unlikely.
  - Persistent 1 percent growth would leave public debt at 80 percent in 2025/26 (20 percent of GDP higher than FRL target).
- Vulnerability to external shocks: natural disasters, sharp rises in risk premia, slowdowns in trade partners, or outbreaks (e.g., Zika).
- Illustrative adverse scenario (Box 4) — assumptions and impacts:
  - SBA access at 312 percent of quota (SDR 1.1953 billion or about US$1.7 billion) justified under plausible downside scenario.
  - Tourism: baseline travel receipts ≈ US$2.6 bn in FY2017/18; adverse shock: 22 percent drop in FY2017/18, gradual return by 2020/21.
  - FDI: adverse shock = 30 percent decline for two consecutive years (FY2016/17 and FY2017/18), return to baseline by FY2019/20.
  - Oil prices (baseline vs adverse): FY2016/17 baseline US$44.9; adverse ≈ US$48. FY2017/18 baseline US$51.3; adverse ≈ US$67. FY2018/19 baseline US$53.4; adverse ≈ US$79.
  - Macro impacts:
    - Baseline average growth FY2016/17–FY2019/20 ≈ 2.3 percent; adverse average ≈ 1.3 percent.
    - Debt 15 percentage points higher by FY2021/22 in adverse scenario.
    - Gross financing needs increase by about 2 percent of GDP in outer years.
  - Exchange rate and inflation in adverse:
    - Cumulative exchange rate depreciation nearly 40 percent over FY2016/17–FY2018/19.
    - REER depreciates by between 9 and 3 percent in FY2016/17–FY2018/19.
    - Inflation about 2 percentage points higher on average over FY2016/17–FY2018/19.
- Quantitative outcomes (selected, Baseline vs Adverse):
  - Current account balance (% GDP):
    - 2016/17: Baseline -2.8; Shock -2.0
    - 2017/18: Baseline -2.8; Shock -9.0
    - 2018/19: Baseline -2.8; Shock -9.5
  - Gross Reserves (mn US$):
    - 2016/17: Baseline 3,094; Shock 3,075
    - 2017/18: Baseline 3,561; Shock 2,637
    - 2018/19: Baseline 3,898; Shock 2,369
  - Memo: Real GDP growth:
    - 2016/17: Baseline 1.7; Adverse 1.5
    - 2017/18: Baseline 2.1; Adverse 1.2
    - 2018/19: Baseline 2.5; Adverse 0.5

---

### Program conditionality, financing, reviews, and monitoring
- Conditionality and targets:
  - Reviews: 6-monthly with indicative targets in intervening quarters; reporting to Executive Board every six months; staff visits in alternating quarters; beginning test date December 2016.
  - Quantitative Performance Criteria (QPC): floors on primary balance of central government and overall balance of public sector; ceilings on contracting new central government-guaranteed debt and accrual of domestic and tax refund arrears; continuous QPC on non-accumulation of external debt payment arrears.
  - Indicative targets: spending on social programs (floor), tax revenues (floor), ceiling on total loan value of user-funded PPPs.
  - QPC floor on non-borrowed NIR.
  - Monetary policy consultation clause linked to inflation band (see Monetary section).
- Financing and capacity to repay:
  - Program fully financed; staff assessment: capacity to repay remains adequate.
  - Baseline: Jamaica’s capacity to repay is good.
  - Adverse scenario with drawing: peak debt service equivalent to 14 percent of exports of goods and services or 4.9 percent of GDP; SBA resources would help ensure debt service would peak at around 16 percent of international reserves.
- Schedule of reviews and purchases (selected SDR amounts and % Quota):
  - Available on or after November 11, 2016: SDR 300.178 (% Quota 78.38) — Approval of Arrangement
  - March 15, 2017: SDR 126.033 — First Review and end-December 2016 performance criteria
  - September 15, 2017: SDR 126.033 — Second Review and end-June 2017 performance criteria
  - Subsequent reviews through September 15, 2019, totaling SDR 1,195.331 (312 percent of quota)
- Key fiscal and quantitative targets (selected, cumulative flows from April 1 through March 31; values preserved exactly as presented):
  - Primary balance of the central government (floor): End-Dec 54.0; end-Mar 123.0; end-June 13.4; end-Sep 38.1; end-Dec 61.0
  - Overall balance of the public sector (floor): End-Dec -51.5; end-Mar -17.2; end-June -41.4; end-Sep -46.9; end-Dec -55.0
  - Tax revenues of the central government (floor): End-Dec 300.0; end-Mar 440.0; end-June 100.0; end-Sep 218.0; end-Dec 330.0
  - Stock of non-borrowed net international reserves (floor, US$ mn): End-Dec 1,428; end-Mar 1,475; end-June 1,521; end-Sep 1,637; end-Dec 1,777

---

### Reporting, data, and TMU definitions
- TMU and program exchange rates (End-August 2016 average daily selling rates):
  - Jamaican dollar to the US dollar: 127.57
  - Jamaican dollar to the SDR: 178.07
  - Jamaican dollar to the Euro: 144.50
  - Jamaican dollar to the Canadian dollar: 98.73
  - Jamaican dollar to the British pound: 167.23
- Reporting frequency and information requirements (selected):
  - Daily: net international reserves; exchange rates; BOJ open market operations; GOJ auction amounts and rates; daily foreign currency GOJ debt payments.
  - Weekly: balance sheets of core securities dealers (coverage at least 70 percent of market); deposits and currency in circulation.
  - Monthly (lag up to six weeks): central government operations; public entities’ Statement A; central government debt amortization; stock of central government expenditure arrears; stock of tax refund arrears; central government spending on social protection; balance sheet of the Bank of Jamaica (within three weeks).
  - Quarterly: summary balance of payments (within three months); GDP growth by sector (within three months); BOJ Quarterly Financial Stability Report.
- Data standards:
  - SBA will support Jamaica’s subscription to the Fund’s SDDS.
  - An IMF joint e-GDDS/SDDS assessment will outline path to SDDS subscription and future TA needs.
  - Emphasis on improving timeliness and periodicity of labor market statistics.

---

*Source: IMF Executive Summary and accompanying materials (document _cr16350_).*

### EXECUTIVE SUMMARY

### _cr16350 - EXECUTIVE SUMMARY

### Context and recent progress
- Jamaica’s current 4-year Extended Arrangement under the Extended Fund Facility (EFF) expires in April 2017.
- Program achievements over more than 3 years include:
  - Inflation and the current account deficit at historical lows; international reserves have more than doubled.
  - Access to domestic and international financial markets restored; upgrades in credit ratings and high business confidence.
  - Reopening of the 2039 global bond at 6.75 percent.
  - Broad tax policy and administration reforms implemented.
  - Financial sector resilience strengthened, including shifting retail repo transactions of securities dealers to a trust-based framework.
- Remaining challenges:
  - Real GDP growth averaged about 0.6 percent during the extended arrangement.
  - Unemployment remains high at 13.7 percent.
  - One-fifth of the population lives in poverty.
  - Wages account for one-third of public expenditures; capital spending is 7 percent and social spending is less than 3 percent of total spending.
  - Public debt remains high and has a high foreign currency composition.
  - High cost of financing for private capital formation.
  - Crime (homicide, burglary, robberies) imposes sizable costs.

### Government’s reform intentions and program request
- New government (elected February 2016) requests cancellation of the extended arrangement and approval of a new 3-year Stand-By Arrangement (SBA).
- Authorities intend to treat the SBA as precautionary, as insurance against potential balance of payments pressures from adverse external shocks.

### Key program pillars
- Better support for growth, jobs, and social protection:
  - Improve public sector efficiency.
  - Rebalance from direct to indirect taxes.
  - Strengthen the social safety net.
  - Reallocate public resources to growth-enhancing infrastructure spending.
- Reduce public debt to 60 percent of GDP by 2025/26 by maintaining a primary surplus at 7 percent of GDP for the duration of the new arrangement.
- Strengthen monetary operations to facilitate a move to inflation targeting:
  - Maintain exchange rate flexibility.
  - Continue to build precautionary reserves through market-based purchases of foreign exchange.
- Bolster financial stability:
  - Strengthen financial supervision.
  - Improve the crisis resolution framework.
  - Further reduce vulnerabilities from securities dealers.

### Program modalities
- Authorities requested a precautionary 36-month SBA with access equivalent to SDR 1.1953 billion (312 percent of quota, or about US$1.7 billion).
- Cancellation of the current extended arrangement approved in May 2013 is requested.
- An initial tranche of SDR 300.1 million (78 percent of quota) is proposed at approval.
- The proposed SBA nearly doubles the Fund’s commitment to Jamaica and will have semi-annual reviews.

### Outlook and risks — key macroeconomic projections and indicators
- Near-term growth:
  - Real GDP growth picked up in FY2015/16 to 1 percent.
  - Q1 FY2016/17 growth was 1.4 percent.
  - Real GDP is expected to grow by 1.7 percent in FY2016/17.
- Medium-term growth:
  - Projected to rise to around 2.8 percent as supply-side reforms boost productivity.
- Inflation:
  - 1.9 percent y/y in September (year stated in source).
  - Projected to return to 5.5 percent over the medium-term, in line with BOJ target range of 4.5–6.5 percent.
- Credit and monetary conditions:
  - BOJ lowered the policy rate by 25 bps in May; cumulative rate cut of 75 basis points since April 2015.
  - Credit to the private sector grew at around 14 percent y/y in August 2016.
- Financial sector metrics (as of June 2016):
  - Banks’ non-performing loans: 3.5 percent of total loans.
  - Provisioning: 111 percent.
  - Banking system capital adequacy ratio (CAR): 14.5 percent (regulatory minimum 10 percent).
- External sector:
  - External current account deficit fell to 1.8 percent of GDP in FY2015/16.
  - Net international reserves (NIR) were US$2.5 billion at mid-October, covering 5.8 months of imports of goods.
  - BOJ expected to build reserves to reach 90 percent of the ARA metric by end-2017, rising to 100 percent by 2019.
  - Current account deficit expected to remain modest at around 3-3½ percent of GDP.
- Exchange rate and external position:
  - Real exchange rate depreciated by 6.6 percent during the first half of 2016.
  - Jamaica’s international investment position noted as -140 percent of GDP.
  - Standard approaches produce divergent signals; balance of risks points to a modest overvaluation.

### Risks and scenarios
- Downside risks to growth:
  - Without private sector-led growth and improvements in the business environment, achieving growth above 2 percent is unlikely.
  - If growth averages 1 percent persistently, public debt would be at 80 percent in 2025/26—20 percent of GDP higher than the Fiscal Responsibility Law’s debt goal.
- Vulnerability to external shocks:
  - Natural disasters (e.g., hurricanes), sharp rises in risk premia, slowdowns in trade partners, or outbreaks (e.g., Zika) could materially affect the medium-term outlook.
- Illustrative baseline macro variables (excerpted):
  - Real GDP growth (%) by year: 1.7, 2.1, 2.5, 2.7, 2.8, 2.8.
  - CPI Inflation (average, %): 2.9, 5.2, 5.5, 5.5, 5.5, 5.5.
  - Primary balance (% GDP): 7.0, 7.0, 7.0, 7.0, 6.5, 6.5.
  - Public Sector Debt (% GDP): 118.3, 110.8, 105.3, 95.8, 88.0, 82.2.
  - Current account balance (% GDP): -2.8, -2.8, -2.8, -2.9, -3.3, -3.6.
  - FDI, net (% GDP): 5.9, 4.5, 4.2, 4.2, 4.2, 4.2.
  - Gross international reserves (US$ mn): 3,129; 3,596; 3,933; 3,973; 4,115; 4,143.
  - Net international reserves (US$ mn): 2,536; 3,019; 3,419; 3,556; 3,815; 3,967.

### Program emphasis: fiscal, monetary, financial, and structural priorities
- Fiscal:
  - Maintain a primary surplus at 7 percent of GDP during the arrangement to reduce public debt to 60 percent of GDP by 2025/26.
  - Reorient spending toward capital and social protection while improving public sector efficiency and rebalancing taxation.
- Monetary:
  - Further strengthen monetary operations to facilitate a move to inflation targeting.
  - Maintain exchange rate flexibility and build precautionary reserves through market-based FX purchases.
- Financial sector:
  - Strengthen financial supervision and crisis resolution framework.
  - Reduce vulnerabilities from securities dealers and consider reserve requirement equalization for FX and local currency deposits (with subsequent stricter FX deposit requirements based on cost-benefit analysis).
- Structural reforms:
  - Improve business environment and cut red-tape to support private-sector-led growth.
  - Rechannel domestic savings towards private sector as public debt declines and financial access improves.
- Social protection:
  - Strengthen the social safety net and protect vulnerable populations while pursuing growth-enhancing policies.

*Source: IMF Executive Summary (October 25, 2016).*

### 12. A clear, medium-term fiscal anchor. Consistent with the 2014 Fiscal Responsibility Law, the

### _cr16350 - 12. A clear, medium-term fiscal anchor. Consistent with the 2014 Fiscal Responsibility Law, the

### Medium-term fiscal anchor
- Target: reduction of Jamaica’s public debt-to-GDP to 60 percent by 2025/26.
- Mechanism: reinvigorating growth and maintaining a primary surplus of 7 percent of GDP during the program period.

### Tax reform and revenue measures
- Policy aim: rebalancing from direct to more growth-friendly indirect taxes (MEFP ¶9).
- Personal income tax (PIT) changes:
  - Phase I: increased PIT exemption threshold from J$592,800 to J$1 million in July 2016.
  - Phase II: planned increase from J$1 million to J$1.5 million by April 2017 (at a cost of 0.8 percent of GDP).
- Offsetting measures and revenue options: narrowing down high-quality revenue options to minimize distortions while balancing equity and efficiency (MEFP ¶9).
- Property taxes: recalibrated property tax rates and bands using the 2013 valuation to be submitted to Cabinet (structural benchmark end-December 2016).
- Medium-term: examining the structure of financial sector taxation to reduce distortionary transaction taxes.

### Social safety net
- Context: Jamaica’s poverty rate has been around 20 percent since 2012; a significant share of the poor remains outside the social safety net (see Box 1).
- Mitigation: authorities will increase expenditures on PATH conditional cash transfers and the school feeding program in FY2017/18 budget by at least the amount necessary to fully shield the bottom quintile from any adverse effects of tax changes (MEFP ¶6).
- Medium-term plans (with development partners): review social safety net programs to improve benefits and coverage, implement graduation strategies, and institute better monitoring and evaluation systems (including through the national ID system).

### Wage bill rationalization and shift to infrastructure spending
- Current wage bill: 10 percent of GDP.
- Near-term target: achieve a wage bill of 9 percent of GDP by FY2018/19 and attain a downward path in the medium term (¶17).
- Measures (MEFP ¶11):
  - Review levels and composition of public sector compensation and define a medium-term wage policy.
  - Comprehensive review of allowances and an employee verification exercise for all central government entities (structural benchmarks for end-March 2017).
  - Submit a public sector wage negotiation framework to Cabinet (structural benchmark end-April 2017).
  - Pursue options for early retirement targeting the eligible population.
  - Implement new human resources software: pilot for 14 smaller entities by end-December 2018; full central government by end-June 2019.
  - Create and apply unambiguous rules for approval of public sector employment (structural benchmark for end-March 2017).

### Security spending and governance
- Priority: decisively tackle crime, an important growth impediment.
- Plan: seek support from other IFIs and bilateral donors to define and finance a program to strengthen public order and security together with strengthened transparency and anti-corruption measures (¶28, MEFP ¶7).

### Public sector transformation
- Objectives: rationalize public entities, divest commercial entities, merge where efficiency gains exist, wind-up inactive/overlapping entities, outsource functions better performed by the private sector (MEFP ¶10).
- Implementation: pursue shared corporate services (first human resources, then public relations/communication and internal audit); costed transition plan and schedule for impacted public workers (structural benchmarks for end-May 2017 and end-November 2017).
- Institutional step: establish a dedicated implementation team for the public sector transformation plan by end-2016.

### Public pension reform
- Draft reform bill elements (in Parliament):
  - Raise retirement age to 65.
  - Require a 5 percent mandatory contribution.
  - Expand benefit assessment period from the last year to the last 5 years of employment.
  - Reduce the commutation benefit and lower the replacement rate (MEFP ¶12).
- Fiscal impact: could yield annual gains of up to 0.5 percent of GDP in the medium to long term.

### Public financial management, tax and customs administration
- Continued reforms with IMF technical support:
  - Training and staffing of the Accountant General’s Department (AGD).
  - Streamlining revenue collection.
  - Strengthening the treasury single account for all central government entities.
  - Improving ICT infrastructure for cash management.
  - Capacity building in tax administration, audit quality, taxpayer information, and controls on transfer pricing.

### Monetary policy: path to inflation targeting
- Objective: strengthen monetary policy credibility and operations to eventually move to inflation targeting; program conditionality described by an inflation target band with a formal consultation clause if the band is breached (MEFP ¶13).
- Key reforms:
  - Transition BOJ’s policy rate from the 30-day CD to an overnight rate; narrow the interest rate corridor; use fixed-volume auctions for sterilization; improve liquidity forecasting in close collaboration with the AGD.
  - Promote operational autonomy of the BOJ by ensuring adequacy of its balance sheet and more efficient liquidity management; submit revisions of the BOJ Act to Parliament addressing Board composition, dividend arrangements, and provision of financing to the GOJ (structural benchmark end-September 2017).
  - Strengthen inflation forecasting tools (with IMF technical support) and improve coordination between monetary operations and debt management.

### Exchange rate policy and international reserves
- FX market development:
  - Institute a multiple-price FX auction to buy and sell FX; support price discovery and increase transparency and efficiency of the FX market (MEFP ¶15).
  - Gradual phase-out of surrender requirements as auctions become effective; auctions could be replaced by an interbank market once sufficiently deep.
  - Note on MCP risk: multiple-price auction could, in theory, generate two winning bids more than 2 percent apart, potentially giving rise to a Multiple Currency Practice (MCP) inconsistent with Article VIII, Section 3 of the Fund’s Articles; authorities requested Executive Board approval for temporary retention should the auction mechanism give rise to a MCP.
- Nonborrowed international reserves (NIR):
  - Current NIR: US$2.5 billion, with around US$1 billion borrowed from local banks via BOJ US$-denominated CDs (outstanding maturities of up to 7 years).
  - Policy: continue accumulating NIR through market purchases while reducing the share of borrowed reserves.
  - Targets: gross reserves reach at least 100 percent of the ARA metric by the end of the program period; increase share of non-borrowed reserves in NIR from about 60 to nearly 80 percent by the end of the program.
  - Program targets will be set in terms of the stock of non-borrowed NIR.

### Financial sector resilience and inclusion
- Immediate priorities (MEFP ¶16):
  - Operationalize the Financial System Stability Committee by finalizing appointment of two external members (structural benchmark end-November 2016).
  - Strengthen the resolution framework for insolvent financial intermediaries; release a consultation paper (structural benchmark end-February 2017).
- Securities dealers industry measures:
  - Prudential guidelines to include: stress test submissions starting in December 2016; introduction (April 2017) and full implementation (April 2019) of leverage and liquidity ratio requirements; stricter limits on single counterparty exposure (April 2019); restrictions on early encashment from retail repo instruments (April 2017).
  - Ensure full compliance with Securities (Retail Repurchase Agreement) Regulations requiring retail repos to be governed by a Master Retail Repurchase Agreement (MRRA) signed by dealer and client (structural benchmark end-May 2017).
- Medium-term priorities:
  - Strengthen depositor protection and supervision of credit unions.
  - Establish regulatory regime for financial holding companies.
  - Implement risk-based supervision for insurance companies and securities dealers (based on IMF TA recommendations).
  - Improve Jamaica’s risk-based implementation of AML/CFT framework, including for the money service business sector.
  - Address high and rising dollarization with macroeconomic and macro-prudential policies (see Box 4 in the Staff Report for the 13th Review Under the Extended Arrangement).

### Strengthening domestic debt markets and debt management
- Reform priorities:
  - Enhance coordination between MOF and BOJ to avoid competition between debt and monetary policy objectives; jointly develop strategy for large upcoming domestic maturities, including possible liability management operations (LMOs) to smooth amortization, minimize refinancing risk, and enhance liquidity in benchmark instruments. Note: successful LMO in international market in August 2016 helped reduce refinancing risk from 2017–19 external debt amortizations.
  - Re-introduce an auction-based mechanism for primary issuances and upgrade the primary dealer system to include market-making obligations in GOJ bonds to enhance price transparency and bond market liquidity.
  - Revise collateral policy for liquidity provision (by amending the BOJ Act) to better reflect risk and market value of underlying assets; a more granular approach would increase collateral value of T-bills and BOJ CDs.

### Structural reforms to raise potential growth
- Institutional lead: Ministry of Economic Growth and Job Creation and Economic Growth Council (EGC).
- Eight focus areas: (i) maintaining macroeconomic stability and pursuing debt-reduction strategies, (ii) improving citizen security, (iii) enhancing access to finance, (iv) improving the business environment, (v) pursuing asset sales and privatization, (vi) building human capital, (vii) better harnessing the diaspora, (viii) catalyzing implementation of strategic projects.
- Selected measures (MEFP ¶5):
  - Reform legislative arrangements, resource allocation, community outreach, and the court system to strengthen citizen security and tackle corruption.
  - Explore selling government assets to use proceeds for debt reduction.
  - Reduce red tape and bureaucracy: improve turnaround time for building approvals, business registration, paying taxes, international trade, and government procurement.
  - Advance privatizations and public-private partnerships (PPPs) and establish a dedicated team for these efforts.
  - Explore feasibility of an investment vehicle to encourage diaspora direct investment into Jamaica.
- Access to finance reforms (with World Bank and IDB, MEFP ¶17):
  - Establish the Financial Inclusion Council (structural benchmark end-March 2017).
  - Accelerate land titling and create a registry of collateral to expand access to credit.
  - Develop markets for agency banking services, mobile money products, factoring and leasing.
  - Table the Micro Credit Act in Parliament.
  - Expand the partial guarantee program of the Development Bank of Jamaica.
  - Review banking sector competitiveness and regulation to improve access without compromising stability.

### Data standards
- SBA will support Jamaica’s subscription to the Fund’s Special Data Dissemination Standard (SDDS).
- An IMF joint e-GDDS/SDDS assessment later this year will outline a step-by-step path to SDDS subscription and future TA needs.
- Emphasis on improving timeliness and periodicity of labor market statistics.

### Program modalities, financing and risks
- Adverse scenario: higher oil prices, lower capital inflows and lower tourism receipts; even after allowing for substantial REER depreciation, gross reserves could fall by US$1.7 billion (Box 4).
- Access calibration: program access ensures that, with steady implementation, SBA resources could be drawn down to keep gross reserves near 100 percent of the IMF’s reserve adequacy metric under the adverse scenario.
- Expected external financing: authorities anticipate Fund support will help catalyze IDB financing, with about US$200 million to be available in the first year.
- Rationale: precautionary nature of program provides insurance for potential BOP pressures and facilitates progressive graduation from IMF BOP support.
- Phasing and reviews: disbursements were phased so that, upon program approval, gross reserves plus eligible purchases under the SBA would reach close to 100 percent of the Fund’s ARA metric.

*Source: _cr16350 - 12. A clear, medium-term fiscal anchor. Consistent with the 2014 Fiscal Responsibility Law, the*

### 300.1 million (78 percent of quota), followed by two tranches equivalent to SDR 126 million (33

### _cr16350 - 300.1 million (78 percent of quota), followed by two tranches equivalent to SDR 126 million (33

### Program conditionality and monitoring
- Reviews will be 6-monthly with indicative targets in the intervening quarters, implying reporting to the Executive Board every six months and staff visits in alternating quarters, with a beginning test date of December 2016.
- Proposed conditionality:
  - Quantitative Performance Criteria (QPC) floors on (i) the primary balance of the central government, and (ii) the overall balance of the public sector.
  - QPC ceilings on (i) contracting of new central government-guaranteed debt, and (ii) the accrual of domestic and tax refund arrears.
  - A continuous QPC on the non-accumulation of external debt payment arrears.
  - Indicative targets: spending on social programs (floor), tax revenues (floor), and a ceiling on the total loan value of user-funded PPPs.
  - Indicative target on contracting of new non-guaranteed debt by public bodies (extends conditionality to include public bodies aligned with the FRL definition of public debt).
  - A QPC floor on non-borrowed NIR.
  - A monetary policy consultation clause linked to an inflation band of 5.5 percent +/- 3.5 percent for the June 2017 and December 2017 test dates, narrowing thereafter to 5.5 +/- 2.5 percent. For the December 2016 test date, an asymmetric band of 5.5 +3.5/-4.5 percent is proposed.

### Financing, capacity to repay, and risks
- The program is fully financed and staff’s assessment of Jamaica’s capacity to repay the Fund remains adequate.
  - Baseline scenario: Jamaica’s capacity to repay is good.
  - Adverse scenario with drawing under the SBA: peak debt service would be equivalent to 14 percent of exports of goods and services or 4.9 percent of GDP.
  - In that scenario, SBA resources would help ensure debt service would peak at around 16 percent of international reserves.
- Historical and program financing figures as presented:
  - Financing Needs 267615221229956
  - Uses of debt financing: Budget financing 1/ 267615221229956
  - Financing Sources:
    - Short-Term168306235244
    - Medium/Long-Term23811319864868
    - Deposits drawdown127-103130-155
  - Note: For 2015/16, values include US$1500 financing for the PetroCaribe debt buyback.
- Jamaica has debt outstanding to the Fund but has never had arrears to the Fund.

### Staff appraisal — macroeconomic and fiscal strategy
- Key program objectives:
  - (i) boosting growth, employment, and providing greater support for the poor;
  - (ii) continuing the reduction of public debt;
  - (iii) reprioritizing and redefining the role of the public sector to create space for growth-enhancing capital spending and an expansion of the social safety net;
  - (iv) build an operational toolkit for an eventual move to inflation targeting with a flexible, market-determined exchange rate;
  - (v) further strengthening financial resilience.
- Fiscal targets and implications:
  - Maintaining a primary surplus of 7 percent of GDP during the program period will ensure that debt remains on a downward path consistent with reaching the FRL’s target of public debt of 60 percent of GDP by FY2025/26.
  - A revenue-neutral shift toward indirect taxation is intended to help make the tax system more growth-friendly.
- Public spending rebalancing:
  - Public spending needs to shift from wages to infrastructure and social spending to streamline the public sector, improve efficiency and accountability, and strengthen controls over public sector employment and compensation.
- Social protection and poverty reduction:
  - Strengthen the safety net to mitigate adverse effects from shifts to indirect taxation and improve targeting and coverage of the existing conditional cash transfer program.
  - Implement a vigorous graduation strategy to enhance skills and move people into productive employment.
- Monetary policy and central bank reforms:
  - Move steadily to an inflation targeting framework underpinned by continued exchange rate flexibility.
  - Increase BOJ operational autonomy, shift to an overnight policy rate, and improve macroeconomic modeling and forecasting.
  - Reserve accumulation should gradually shift from borrowed reserves to market-based FX purchases through FX auctions (with FX sales limited to periods of high currency market volatility).
- Financial sector and inclusion measures:
  - Strengthen the resolution framework, enhance regulatory and supervisory regimes including for AML/CFT, address balance sheet risks of securities dealers, and counter rising dollarization.
  - Promote greater access to credit and financial inclusion via accelerating land titling, assessing banking sector competition, and developing agency and mobile banking products.
- Staff recommendation:
  - Staff supports the authorities’ request for a precautionary Stand-By Arrangement.

### Social spending — PATH Program (Box 1)
- PATH overview:
  - PATH (Programme of Advancement through Health and Education) created in 2001.
  - Targets: (i) pregnant and lactating mothers, (ii) children (school age and younger), (iii) the elderly without pensions, and (iv) disabled adults.
  - PATH’s cash transfers account for ¼ percent of GDP, providing benefits to 350,000 individuals.
  - Linked school feeding program accounts for another ¼ percent of GDP, providing at least three meals a week to approximately 389,000 school children, out of which 200,000 are PATH beneficiaries.
- Eligibility and administration:
  - Eligibility based on a proxy means tested formula considering education, dwelling quality, location, and assets.
  - Benefits require conditional clinic visits for pregnant mothers and children below school age, and school attendance for school-aged children.
  - Benefits range from J$1,000 to J$1,725 per compliant beneficiary, per month.
  - Households are recertified every 4 years.
- Coverage and adequacy:
  - In the bottom decile of consumption, only 58 percent live in a household that receives PATH benefits.
  - Coverage among persons with disabilities in the bottom decile: 10 percent.
  - For recipient families in the bottom decile, benefits represent less than 5 percent of household expenditures.
  - Coverage among higher deciles remains significant, with a quarter of households in the 6th decile receiving PATH benefits.
- Composition of social welfare expenditures (% total = 0.77% GDP):
  - PATH (cash benefits) 34%
  - School feeding program 30%
  - Institutional care 23%
  - Active labor market policies 7%
  - Other 6%
- PATH Benefits and Beneficiaries (monthly benefit (J$) and % of total beneficiaries as presented):
  - Pregnant and lactating mothers 1,190 0.5
  - Children < school age 1,000 26.6
  - Children grades 1-6 1,045 23.7
  - Children grades 7-9 1,400 14.9
  - Children grades 10-13 1,600 8.4
  - Adults < 65 1,190 2.6
  - Adults > 65 1,725 16.7
  - People with disabilities 1,190 3.7
  - Poor relief 1,190 3.0

### Strengthening monetary transmission mechanism (Box 2)
- Staff analysis indicates weak pass-through from the BOJ policy rate to bank lending rates, particularly following two debt restructurings (model estimated using monthly interest rate data from 2005-2015).
- Possible explanations for weak transmission:
  - Fiscal dominance, high and rising dollarization of public and private balance sheets, limited competition in the banking sector, uneven excess liquidity among banks, and underdeveloped interbank FX and money market.
  - Gaps in BOJ governance and autonomy reduce credibility and mute policy signals.
  - Bond market has not fully recovered; secondary market trading remains shallow, resulting in poor price discovery.
- Four main pillars of reforms to strengthen monetary transmission:
  - Fiscal consolidation (¶12,38) and debt sustainability (¶12,37)
  - Financial sector resilience (¶42) and financial inclusion (¶29)
  - Bond market liquidity: reduce dollarization (¶26), primary dealers (¶27), auctions vs taps (¶27), reduce market segmentation (¶21, 27), building benchmarks (¶27), collateral policies (¶27)
  - Policy signaling and liquidity management: primary objective - inflation (IT) (¶20), BOJ independence (¶21), interest rate corridor (¶21), FX auctions (¶22), interbank market (¶22), better forecasting (¶21), reduce excess/uneven liquidity (¶21), communication; data sharing; transparency, coordination between BOJ/MOFP/AGD (¶27)
- Empirical indicators presented:
  - Interest Rate Passthrough (Cummulative over 3 months) from policy rate to interbank rate and from interbank rate to lending rate (2005 - 2015).
  - Policy and Lending Rates (in percent): weighted average lending rate and policy rate (30-day CD) shown over 2000–2016.

### SDDS progress (Box 3)
- SDDS observance summary as presented (selection of categories and periodicity/timeliness where indicated in the text):
  - National accounts: Yes QQ1Q1Q
  - Price index: Consumer prices: Yes MM1M15D
  - Price index: Producer prices: Yes MM1M1M
  - Central government operations: Yes MM1M1M
  - Interest rates: Yes DD,M1D1D
  - Stock market: Share price index: Yes DD1D1D
  - Official reserve assets: Yes MM1W7D
  - External debt: Yes QM1Q1M
  - Exchange rates: Yes DD1DD
  - Summary of SDDS Observance: Yes MM2W2W
  - Financial Sector: Yes MM1MM
  - Fiscal Sector (Specifications): Yes QM1Q1M
  - Real Sector: No MA,Q6W10W

*Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2016/_cr16350.pdf*

### Box 4. Illustrative Adverse Scenario

### Box 4. Illustrative Adverse Scenario

### Overview
- Access at 312 percent of quota (SDR 1.1953 billion or about US$1.7 billion) can be justified under a plausible downside scenario.

### Adverse scenario assumptions
- Tourism receipts
  - Baseline: travel receipts projected to reach about US$2.6 bn in FY2017/18.
  - Adverse shock: a 22 percent drop in travel receipts for FY2017/18, in line with the largest observed drop and equivalent to 2 standard deviations from the distribution of annual percent change in total travel receipts.
  - Path: these flows are assumed to gradually return to the baseline path by 2020/21.
- Foreign direct investment (FDI)
  - Adverse shock: a 30 percent decline in FDI inflows for two consecutive years (FY2016/17 and FY2017/18) and a slow recovery, in line with the decline registered following the 2008/09 global financial crisis.
  - Path: FDI inflows are assumed to return to the baseline path by FY2019/20.
- Oil prices
  - Baseline oil prices: FY2016/17 = US$44.9 per barrel; FY2017/18 = US$51.3 per barrel; FY2018/19 = US$53.4 per barrel.
  - Adverse scenario oil prices: FY2016/17 ≈ US$48; FY2017/18 ≈ US$67; FY2018/19 ≈ US$79.
  - Path: From FY2019/20 onwards, prices return to the baseline WEO path.

### Macro impacts: GDP, debt, and gross financing needs (GFN)
- Growth
  - Baseline average growth over FY2016/17-FY2019/20: about 2.3 percent.
  - Adverse scenario average growth over FY2016/17-FY2019/20: 1.3 percent.
  - Growth rates return to the baseline starting in FY2020/21.
- Debt and financing
  - Debt is 15 percentage points higher by FY2021/22 in the adverse scenario.
  - Gross financing needs increase by about 2 percent of GDP in the outer years.

### Exchange rate and inflation
- Exchange rate depreciation
  - Over FY2016/17-FY2018/19 in the adverse scenario, cumulative exchange rate depreciation is expected to be nearly 40 percent.
  - REER depreciates by between 9 and 3 percent in FY2016/17-FY2018/19.
- Inflation
  - Inflation is expected to be about 2 percentage points higher on average over FY2016/17-FY2018/19.

### Quantitative outcomes and selected indicators (Baseline vs Adverse)
- Current account balance (% GDP)
  - 2016/17: Baseline -2.8; Shock -2.0
  - 2017/18: Baseline -2.8; Shock -9.0
  - 2018/19: Baseline -2.8; Shock -9.5
- Capital and financial account (% GDP)
  - 2016/17: Baseline 3.6; Shock 3.4
  - 2017/18: Baseline 6.1; Shock 5.2
  - 2018/19: Baseline 5.4; Shock 5.5
- FDI, net (% GDP)
  - 2016/17: Baseline 5.9; Shock 4.6
  - 2017/18: Baseline 4.5; Shock 3.3
  - 2018/19: Baseline 4.2; Shock 4.1
- Portfolio flows central gov (net, % GDP)
  - 2016/17: Baseline -1.2; Shock -0.5
  - 2017/18: Baseline 1.2; Shock 1.3
  - 2018/19: Baseline -0.1; Shock -0.2
- Gross Reserves (mn US$)
  - 2016/17: Baseline 3,094; Shock 3,075
  - 2017/18: Baseline 3,561; Shock 2,637
  - 2018/19: Baseline 3,898; Shock 2,369
- ARA metric (mn US$)
  - 2016/17: Baseline 3,899; Shock 3,950
  - 2017/18: Baseline 3,887; Shock 3,994
  - 2018/19: Baseline 3,789; Shock 4,073
- Difference of reserves relative to 100% ARA (mn US$)
  - 2016/17: (806)
  - 2017/18: (875) (Baseline), (1,357) (Shock)
  - 2018/19: (326) (Baseline), 110 (Baseline) / (1,704) (Shock)

### Memo: Real GDP growth (selected values)
- 2016/17: Baseline 1.7; Adverse 1.5
- 2017/18: Baseline 2.1; Adverse 1.2
- 2018/19: Baseline 2.5; Adverse 0.5

*Source: IMF staff.*

### 2. Overall balance of the

### _cr16350 - 2. Overall balance of the

### Quantitative performance criteria and indicative targets (selected)
- Overall balance of the public sector (floor) 3/: -51.5, -17.2, -41.4, -46.9, -55.0
- Net increase in the central government guaranteed debt (ceiling) 3/: 0.0, 0.0, 0.0, 0.0, 0.0
- Central government accumulation of domestic arrears (ceiling) 4/ 10/ 11/: 0.0, 0.0, 0.0, 0.0, 0.0
- Central government accumulation of tax refund arrears (ceiling) 5/ 10/ 11/: 0.0, 0.0, 0.0, 0.0, 0.0
- Consolidated government accumulation of external debt payment arrears (ceiling) 4/ 10/: 0.0, 0.0, 0.0, 0.0, 0.0

### Indicative targets (selected)
- Tax revenues of the central government (floor) 3/ 7/: 300.0, 440.0, 100.0, 218.0, 330.0
- Change in the stock of public bodies non-guaranteed debt (ceiling) 7/ 12/: -1.0, 2.3, 7.6, -7.0, -4.1
- Central government spending on social programs (floor) 3/ 7/ 8/: 16.4, 24.3, 5.0, 10.2, 17.3
- Total loan value of all user funded PPPs (ceiling, percent of GDP): 3.0, 3.0, 3.0, 3.0, 3.0

### Monetary targets and parameters
- Stock of non-borrowed net international reserves (floor) 6/ 9/ (in millions of U.S. dollars): 1,428; 1,475; 1,521; 1,637; 1,777
- Monetary policy consultation clause (in percent) — Upper band: 9.0, 9.0, 9.0, 9.0, 9.0
- Monetary policy consultation clause (in percent) — Center inflation target: 5.5, 5.5, 5.5, 5.5, 5.5
- Monetary policy consultation clause (in percent) — Lower band: 1.0, 2.0, 2.0, 2.0, 2.0

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

### Indicators of Fund credit, amortization, and debt service (selected figures)
- Prospective drawings (4-year EFF): 84.96 (in percent of quota) 22.19
- Prospective drawings (3-year SBA): 300.10, 252.00, 321.60, 321.60 (in percent of quota): 78.38, 65.81, 83.99, 83.99
- Amortization (selected years): 0.00, 11.40, 37.11, 64.80, 296.73, 449.57, 397.32, 322.93, 136.42, 28.32, 9.44, 0.00
- Amortization (4-year EFF): 0.00, 11.40, 37.11, 64.80, 83.68, 93.12, 93.12, 81.73, 56.02, 28.32, 9.44, 0.00
- Amortization (3-year SBA): 0.00, 0.00, 0.00, 0.00, 213.05, 356.45, 304.20, 241.20, 80.40, 0.00, 0.00, 0.00
- Interest and service charges (selected): 1.43, 14.60, 22.67, 31.59, 39.37, 27.83, 11.33, 4.24, 1.36, 0.33, 0.07, 0.00
- GRA surcharges (selected): 0.00, 4.66, 9.92, 15.93, 22.98, 14.95, 2.95, 0.00, 0.00, 0.00, 0.00, 0.00
- SDR charges and assessments (each period): 0.01, 0.05, 0.05, 0.05, 0.05, 0.05, 0.05, 0.05, 0.05, 0.05, 0.05, 0.05
- Total debt service (selected): 2.95, 27.30, 61.44, 98.05, 336.16, 477.46, 408.71, 327.22, 137.83, 28.70, 9.56, 0.05
  - (in percent of exports of G&S) 2/: 0.10, 1.04, 2.18, 3.24, 10.38, 14.15, 11.48, 8.90, 3.63, 0.73, 0.22, 0.00
  - (in percent of GDP) 2/: 0.03, 0.30, 0.71, 1.12, 3.64, 4.91, 4.00, 3.05, 1.22, 0.24, 0.07, 0.00
- Outstanding stock (selected): 858.83, 1,099.43, 1,383.93, 1,640.73, 1,343.99, 894.42, 497.10, 174.18, 37.76, 9.44, 0.00, 0.00
  - (in percent of quota): 224.30, 287.13, 361.43, 428.50, 351.00, 233.59, 129.83, 45.49, 9.86, 2.47, 0.00, 0.00
  - (in percent of GDP) 2/: 9.18, 12.20, 16.04, 18.68, 14.54, 9.20, 4.87, 1.62, 0.34, 0.08, 0.00, 0.00
- Exports of goods and services (US$ millions) 2/: 4,388.38, 3,915.53, 4,202.50, 4,514.96, 4,826.61, 5,030.65 (additional years not shown)
- Debt service as percent of baseline exports (selected): 0.10, 0.90, 1.96, 3.03, 10.05, 13.82

### Proposed schedule of reviews and purchases (selected)
- Available on or after November 11, 2016: SDR millions 300.178 (% Quota 78.38) — Approval of Arrangement
- March 15, 2017: 126.033 — First Review and end-December 2016 performance criteria
- September 15, 2017: 126.033 — Second Review and end-June 2017 performance criteria
- March 15, 2018: 160.842 — Third Review and end-December 2017 performance criteria
- September 15, 2018: 160.842 — Fourth Review and end-June 2018 performance criteria
- March 15, 2019: 160.842 — Fifth Review and end-December 2018 performance criteria
- September 15, 2019: 160.842 — Sixth Review and end-June 2019 performance criteria
- Total: 1,195.331 SDR millions (% Quota 312)

### Annex I. Debt Sustainability Analysis — Key findings (A. Public DSA)
- Historical and projected trend:
  - Public debt fell by about 20 percent of GDP to 120 percent of GDP between FY2013/2014 and FY2015/16.
  - Under current baseline projections, public debt would be reduced to 96 percent of GDP at end-March 2020.
- Drivers and assumptions:
  - Slight rise in debt-to-GDP between 2015/16 and 2016/17 driven by exchange rate movements and higher domestic bond market issuances.
  - Government fully financed for 2016/17; domestic bond issuances used to prefinance large 2017/18 maturities.
- Fiscal consolidation and past measures:
  - Central government operations posted a primary surplus of 7½ percent of GDP over FY2013/14 and FY2014/15.
  - Primary surplus target lowered by ¼ and ½ percent of GDP for FY2015/16 and FY2016/17 respectively; target of 7 percent of GDP per year from FY2016/17 onwards.
  - Buyback of the PetroCaribe debt in July 2015 resulted in an upfront reduction of public debt by 10 percent of GDP.
- Required policy stance:
  - Continued debt reduction contingent on sustaining a 7 percent of GDP primary balance throughout the program.
  - A realism test notes Jamaica is an outlier for 3-year average CAPB but maintaining 7 percent of GDP primary balance is deemed achievable.
- Definition changes:
  - Fiscal Responsibility Law (FRL)-consistent debt definition implies a debt path over 5 percentage points of GDP lower than the EFF definition in FY2016/17–FY2017/18; in the long term FRL path approaches EFF as net public body debt increases and central bank holdings decline.

### Annex I. Debt Sustainability Analysis — Risks and stress scenarios
- Key risks:
  - Debt reduction hinges on sustained fiscal consolidation; fiscal complacency could trigger higher sovereign yields and adverse debt dynamics.
  - Economic slack: a scenario with 1.7 percentage points lower real GDP growth in FY2017/18 and FY2018/19 (one standard deviation) would deteriorate the primary balance by 0.5 and 0.9 percent in those years; public debt would rise to about 102 percent of GDP by end-March 2020 (6 percent above current projection).
  - Contingent liabilities: a financial sector contingent liability stress test indicates public debt could rise to 105 percent at end-March 2020 if subject to a one-time increase in non-interest expenditures equivalent to 10 percent of the banking sector’s assets.
  - Overall risks remain elevated; joint historical distribution implies a 25 percent probability that public debt would exceed 104 percent of GDP at end-March 2020 absent contingent liability shock.
- Natural disaster stress test:
  - Calibration: assumes damages equal to 4 percent of GDP (twice the conditional average cost over past two decades).
  - Parametrization: real growth about 2 percentage points lower in year of disaster, accelerate by 0.5 percentage points the following year; government covers 3 percent of GDP (¾ of damages); fiscal expenditure spread over 3 years: 1.5 percent of GDP in first year, 1 and ½ percent in next two years respectively.
  - Impact: shock shifts public debt trajectory up by around 5 percent of GDP above baseline; public debt would reach 101 percent of GDP at end-March 2020.
  - Historical context: largest past disasters caused damages of 65 percent (1988 hurricane Gilbert) and 6.6 percent (2004 hurricane Ivan) of GDP.
- Policy implications from risks:
  - Important to implement reforms to strengthen financial sector stability.
  - Build sizable and lasting fiscal buffers to cover future disaster costs.
  - Further develop domestic bond market to mitigate rollover and FX risks.

### Annex I. Debt Sustainability Analysis — External DSA (selected)
- Shift to external financing:
  - External financing between 2013 and 2015 increased foreign currency exposure; external debt estimated around 68 percent of GDP in FY2016/17, about 4 percentage points higher than in FY2013/14.
  - Foreign-currency denominated debt accounts for about 61 percent of total debt.
- Market sentiment and mitigation:
  - Average EMBIG spread dropped by over 160 bps to 532 bps, below the upper risk-assessment benchmark of 600 bps.
  - Successful international bond buyback in August reduced upcoming external debt repayments in 2017/18-2019/20 by about $780mn.
  - Reactivation and development of the domestic bond market provide scope to shift financing toward domestic sources and reduce FX risk.

*Source: Fund staff estimates.*

### 9. There are risks related to PetroCaribe financing with the expectation of long-lasting

### 9. There are risks related to PetroCaribe financing with the expectation of long-lasting low oil prices and increasing uncertainty of oil shipment from Venezuela

### Risks and context
- Oil prices are projected to recover modestly over the medium term, but uncertainty of oil supply from Venezuela has increased.
- Gross inflows at highly concessional terms from PDVSA are expected to be continuously low.
- Securing alternative low-cost financing where possible (e.g., from IFIs) would mitigate risks to public debt dynamics.

### Public debt dynamics and projections (selected figures and indicators)
- Nominal gross public debt (percent of GDP): 133.5 (2014), 137.6 (2015), 120.2 (2016), 118.3 (2017), 110.8 (2018), 105.4 (2019), 96.2 (2020), 88.2 (2021), 82.5 (projection horizon shown).
- Public gross financing needs (percent of GDP): 17.8 (2014), 5.9 (2015), 18.8 (2016), 10.8 (2017), 8.4 (2018), 6.2 (2019), 6.4 (2020), 8.0 (2021), 3.9 (later projection).
- Real GDP growth (percent): 0.1 (2014), 0.2 (2015), 1.1 (2016), 1.7 (2017), 2.1 (2018), 2.5 (2019), 2.7 (2020), 2.8 (2021), projection steady at 2.8 thereafter.
- Inflation (GDP deflator, percent): 10.0 (2014), 7.3 (2015), 6.5 (2016), 2.9 (2017), 5.1 (2018), 5.5 (2019–2021).
- Effective interest rate (percent): 10.8 (2014), 6.7 (2015), 6.3 (2016), 7.2 (2017), 6.9 (2018), 7.3 (2019), 7.3 (2020), 7.6 (2021), 8.0 (later).
- Change in gross public sector debt (percent of GDP): 1.7 (2014), -2.8 (2015), -17.4 (2016), -1.9 (2017), -7.5 (2018), -5.4 (2019), -9.2 (2020), -8.0 (2021), cumulative -37.7 (over projection period).
- Identified debt-creating flows (percent of GDP): -2.2 (2014), -0.3 (2015), -4.7 (2016), -3.3 (2017), -8.4 (2018), -6.8 (2019), -8.9 (2020), -8.2 (2021), cumulative -41.8.
- Primary deficit (percent of GDP): -6.4 (2014), -7.5 (2015), -7.1 (2016), -7.0 (2017–2019), -6.5 (2020–2021); cumulative -40.8.
- Primary (noninterest) revenue and grants (percent of GDP): 27.0 (2014), 26.2 (2015), 27.0 (2016), 27.4 (2017), 27.1 (2018), 26.4 (2019), 26.2 (2020), 26.0 (2021), 25.9 (later); cumulative 159.0.
- Primary (noninterest) expenditure (percent of GDP): 20.6 (2014), 18.7 (2015), 19.8 (2016), 20.5 (2017), 20.1 (2018), 19.4 (2019), 19.2 (2020), 19.5 (2021), 19.4 (later); cumulative 118.1.
- Automatic debt dynamics contribution (percent of GDP): 5.3 (2014), 2.9 (2015), 3.4 (2016), 2.9 (2017), -0.6 (2018), -0.9 (2019), -1.0 (2020), -0.8 (2021), -0.3 (later), cumulative -0.7.

### Stress tests and scenario outcomes (selected)
- Heat-map stress test legend: benchmarks include 70% debt burden; gross financing needs benchmark of 15%; bond spread shocks of 200 and 600 basis points; external financing requirement shocks of 5 and 15 percent of GDP; change in share of short-term debt of 0.5 and 1 percent; public debt held by non-residents 15 and 45 percent; share of foreign-currency debt 20 and 60 percent.
- Alternative scenarios shown: Baseline, Historical, Constant Primary Balance.
- Baseline primary balance (percent of GDP): 7.0 (2016–2019), 6.5 (2020–2021).
- Constant Primary Balance scenario: Primary Balance 7.0 (2016–2021).
- Stress test scenarios include: Primary Balance Shock; Real GDP Growth Shock; Real Interest Rate Shock; Real Exchange Rate Shock; Combined Macro-Fiscal Shock; Contingent Liability Shock (e.g., natural disaster).
- Example scenario parameter changes (selected): Under Real Interest Rate Shock, Effective interest rate rises to 7.4–8.0–8.7 in projection years shown; under Real Exchange Rate Shock, Inflation spikes to 13.2 in one year.

### External debt sustainability (selected figures)
- External debt (percent of GDP): 71.4 (2010/11), 64.7 (2011/12), 61.9 (2012/13), 64.1 (2013/14), 66.8 (2014/15), 66.4 (2015/16), 68.4 (2016/17), 68.7 (2017/18), 65.8 (2018/19), 62.5 (2019/20), 59.3 (2020/21).
- Change in external debt (percent of GDP): 2.3 (2010/11), -6.8 (2011/12), -2.7 (2012/13), 2.1 (2013/14), 2.7 (2014/15), -0.4 (2015/16), 2.0 (2016/17), 0.2 (2017/18), -2.9 (2018/19), -3.2 (2019/20), -3.2 (2020/21).
- Identified external debt-creating flows (percent of GDP): 0.4 (2010/11), 7.0 (2011/12), 7.8 (2012/13), 7.8 (2013/14), 3.0 (2014/15), -4.7 (2015/16), -3.0 (2016/17), -2.7 (2017/18), -2.6 (2018/19), -2.4 (2019/20), -2.1 (2020/21).
- Current account deficit, excluding interest payments (percent of GDP): 4.4 (2010/11), 10.4 (2011/12), 7.1 (2012/13), 5.7 (2013/14), 3.9 (2014/15), -1.1 (2015/16), -1.0 (2016/17), -0.4 (2017/18), -0.3 (2018/19), -0.1 (2019/20), 0.2 (2020/21).
- Gross external financing need (in billions of US dollars): 1.4 (2010/11), 2.7 (2011/12), 2.1 (2012/13), 1.5 (2013/14), 1.6 (2014/15), 1.2 (2015/16), 1.7 (2016/17), 1.0 (2017/18), 1.0 (2018/19), 1.0 (2019/20), 0.9 (2020/21).
- External debt-to-exports ratio (in percent): 241.0 (2010/11), 221.6 (2011/12), 202.3 (2012/13), 211.5 (2013/14), 211.0 (2014/15), 217.9 (2015/16), 219.9 (2016/17), 222.8 (2017/18), 217.5 (2018/19), 211.5 (2019/20), 205.1 (2020/21).

### Policy recommendations and program requests (from Letter of Intent and MEP highlights)
- Secure alternative low-cost financing where possible (e.g., from IFIs) to mitigate risks to public debt dynamics given lower PetroCaribe inflows.
- Institutionalize exchange rate flexibility and develop the interbank market, including introduction of multiple-price FX auctions to buy and sell FX from the market; request Board approval to retain any temporary multiple currency practice (MCP) if it emerges, on grounds that: (i) the measure does not materially impede Jamaica’s BOP adjustment; (ii) does not harm interests of other IMF members; (iii) does not discriminate among members; and (iv) is temporary until interbank market development.
- Government requests a 36-month Stand-By Arrangement with the IMF with access equivalent to SDR 1.1953 billion (312 percent of quota or about US$ 1.7 billion); intention to treat the arrangement as precautionary and request semi-annual programme reviews; request cancellation of the existing Extended Arrangement.
- Government priorities stated: re-orient budget composition toward growth-enhancing spending; shift tax system from direct to indirect taxes; better protect poorest citizens; expand and improve security spending; improve government efficiency and effectiveness.

*Source: IMF staff calculations and Letter of Intent excerpts as presented in the Jamaica Public DSA and accompanying materials (as of October 03, 2016 and October 21, 2016).*

### 1. Buttressed by the Jamaican government’s committed policy implementation over the

### _cr16350 - 1. Buttressed by the Jamaican government’s committed policy implementation over the

### Achievements and rationale for the Stand-By Arrangement
- Public debt has fallen by 27 percent of GDP.
- Net international reserves have tripled.
- Inflation has fallen to historic lows.
- Macroeconomic stability has become entrenched.
- Despite these achievements, growth and job creation remain insufficient; a three-year Stand-By Arrangement (SBA) is requested to support efforts to create high quality private sector jobs, protect the poor, improve citizen security, strengthen public safety, and improve government effectiveness.

### Central policy platform (central planks)
- Growth and job creation:
  - Rapidly facilitate strategic private investments in Jamaica, including by the diaspora, to tap new economic opportunities and generate faster growth and employment.
  - Tackle obstacles including crime, red-tape, access to finance and the inefficient utilization of public assets.
  - Create growth opportunities by transforming the public sector through efficiency gains and improved service delivery.
- A responsible and equitable budget:
  - Maintain the central government primary surplus at 7 percent of GDP.
  - Continue to rebalance from taxing wage earnings to indirect taxes.
  - Lower the public sector wage bill and create space for stronger support for the most vulnerable and for growth-enhancing capital spending.
- A modern monetary framework:
  - Move eventually to a full-fledged inflation targeting framework and bolster monetary and FX operations toolkit.
  - First step: target an inflation rate of 5.5 percent with an inflation corridor initially set at +3.5/-4.5 percent in December 2016 and narrowing thereafter.
- A more robust financial system:
  - Strengthen the crisis resolution framework, enhance risk-based supervision, and mitigate risks from securities dealers.
  - Request a Financial Sector Assessment Program (FSAP) assessment in early 2018.

### Growth and job creation — Economic Growth Council priorities
- Continue to maintain macroeconomic stability while pursuing debt reduction strategies.
- Improve citizen security and public safety to ensure a safe business environment to attract domestic and foreign investment.
- Improve access to finance.
- Review competition and regulatory policies in the financial sector to facilitate lending and investing while maintaining financial stability.
- Continue to reduce bureaucracy and red-tape to further improve the business environment.
- Stimulate better asset utilization through asset sales and privatizations.
- Enhance diaspora involvement in economic growth and investment.
- Catalyze the implementation of strategic projects.
- Implementation support and time-bound measures to be provided with assistance from the World Bank, the IDB, and other development partners.

### Social protection and poverty reduction
- Poverty is identified as a critical problem needing immediate attention.
- PATH program measures:
  - Institute a significant increase in the PATH conditional cash transfer benefits in the FY2017/18 budget.
  - Expand the PATH School Feeding Programme to 5 days.
  - Increase coverage of the bottom quintile of households (by consumption level) in the PATH program from the current 55 percent.
  - Review efficiency and effectiveness of existing programs to ensure children from poor households remain in school.

### Public security and crime reduction
- Crime and lack of public security are described as key social and economic constraints, disproportionately affecting the poor.
- Comprehensive approach to be implemented, including:
  - Broad institutional reform to reorganize the police force and improve court system administration.
  - Address corruption by strengthening frameworks around seizures, forfeitures, and witness protection, and implementing AML/CFT measures to prevent laundering of proceeds of corruption.
  - Address social exclusion, including implementing Clear, Hold, and Build strategies and a review of all informal settlements (where a fifth of Jamaicans live).
- Resources to enhance security to be identified from central government resources and ministry-controlled public bodies; the budget will be reprioritised to implement identified measures.

### Fiscal plan and targets
- Target central government primary surplus of 7 percent of GDP throughout the 3-year SBA.
- Bring public debt down to 60 percent of GDP by FY2025/26 as mandated by the Fiscal Responsibility Law.
- Make changes to tax structure and expenditure composition to support these goals.

### Tax policy measures and timing
- Rebalance from direct to indirect taxation.
- On July 1, 2016:
  - Exemption threshold for the personal income tax (PIT) raised to J$1 million.
  - Marginal tax rate on earnings above J$6 million increased to 30 percent.
  - Offsetting measures: increase in special consumption tax on fuels and raising the departure tax.
- April 1, 2017:
  - Further increase of the exemption threshold to J$1.5 million.
- Offsetting revenue loss and generating additional revenues to expand social transfers to shelter the vulnerable.
- Strengthen property taxes.
- Continue improving tax administration and lowering compliance costs.

### Public sector transformation measures
- Action plan submitted to Cabinet in September 2016 includes plans to:
  - Merge, close, divest, and outsource government functions better performed by the private sector.
  - Introduce shared corporate services for communications, human resource management and asset management, and centralize legal services.
  - Reduce the number of public bodies and strengthen financial reporting requirements on remaining entities.
  - For strategic interventions, ensure a plan is in place for transitioning employment from the public sector to the private sector.

### Public service reform and wage controls
- Reprioritize budgetary resources toward security, social, and growth-enhancing capital spending.
- Comprehensive compensation review and database on all wages and allowances in the Ministries of Finance, Health, Security, and Education (which together account for over four-fifths of spending on wages and allowances).
  - Completion timeline:
    - These entities: by end-November 2016.
    - All entities in the central government wage bill: by end-March 2017.
- Full employee census to verify each employee's post and eligibility for allowances:
  - Completed at the NIS, the Ministry of Finance and the Public Service, and the civilian population at the police department.
  - Extend census to non-teaching personnel in the Ministry of Education by end-November 2016.
  - Extend to all entities in the central government wage bill by end-March 2017.
- Upgrade human resources software system and strengthen safeguards against hiring outside approved positions.

### Pension reform
- Public sector pension reform bill expected to become effective on April 1, 2017.
- Proposed law provisions:
  - Raises the retirement age to 65 years.
  - Requires a 5 percent mandatory contribution from workers.
  - Expands the benefit assessment period from the last year’s wage to the average of the last 5 years’ wages.
  - Reduces the commutation benefit.
  - Lowers the benefit accrual rate to 1.8 percent.
- Government intends to undertake an outreach campaign to educate and foster early retirement for eligible public sector workers.

### Central bank modernization and monetary framework
- Intend to move to an inflation targeting regime supported by a flexible exchange rate.
- Monetary conditionality under the SBA:
  - Commitment to achieving an annual headline inflation target of 5.5 percent.
  - Asymmetric band of +3.5/-4.5 percent for December 2016 test date.
  - For 2017: plan to implement a symmetric band of ±3.5 percent around the target rate.
  - Expect to narrow the band to ±2.5 for 2018 until the end of the program.
  - Mid-point target rate will be reviewed and potentially tightened based on prevailing and expected macroeconomic conditions.
  - If inflation breaches specified bands at program test dates, complete a consultation with the IMF’s executive board analyzing reasons, policies undertaken, and corrective actions the central bank plans to undertake.
- By June 2017, the central bank will make the overnight rate its policy rate to increase signaling power.
- Safeguards and governance:
  - Last safeguards assessment (completed in 2013) found a strong framework at the Bank of Jamaica but recommended governance strengthening.
  - Intend to submit revisions to the Bank of Jamaica Act to Parliament by September 2017 to strengthen BOJ operational independence and modernize arrangements for paying dividends, appointments to the BOJ Board, and provision of central bank financing to the government.
  - Ensure organizational structure and technical capacity are consistent with the envisioned modernization.

### Foreign exchange operations and reserve policy
- By June 2017, the BOJ will begin buying and selling FX from the market using multiple-price FX auctions to foster price discovery and increase transparency and efficiency.
- Plan to steadily phase-out use of borrowed reserves and surrender requirements and gradually build foreign currency buffers through market purchases.
- By the end of the SBA:
  - The central bank’s international reserves will exceed 100 percent of the IMF’s reserve adequacy metric.
  - The government will have reduced reliance on borrowed reserves.

### Financial sector resilience measures (next 12 months)
- Introduce new legislation to enhance the resolution framework for distressed financial sector entities.
- Securities dealer industry measures:
  - Implement regular stress testing.
  - Phase in a ceiling on the size of exposure to counterparties.
  - Restrict early encashment on retail repos.
  - Introduce a minimum retail repo leverage ratio.
- Credit union measures:
  - Table in Parliament a bill to amend the Cooperative Societies Act and the Bank of Jamaica (Credit Union) Regulations to bring credit unions under the prudential supervision of the Bank of Jamaica and extend deposit insurance to those entities.
- Introduce legislation to define regulatory rules for financial holding companies and require consolidated supervision.
- To lessen risks of dollarization:
  - Equalize the reserve requirements for foreign currency and domestic currency bank deposits by December 2016.
  - Conduct a cost-benefit analysis on introducing stricter reserve requirements for foreign currency deposits.

*International Monetary Fund*

### 17. We have also devised a strategy to increase financial inclusion. This strategy, which has

### _cr16350 - 17. We have also devised a strategy to increase financial inclusion. This strategy, which has

### Financial inclusion strategy
- Strategy approved by Cabinet covering:
  - better financing for smaller enterprises and the rural sector
  - expanding access to housing finance and the payments system
  - improving consumer protections and increasing financial literacy
- Institutional oversight:
  - A financial inclusion council will be created by March 2017 to oversee implementation.

### Tax policy
- Property tax:
  - The new rates and bands for property taxes using the 2013 land valuations will be completed and submitted to Cabinet. Date: Dec-16. Structural Benchmark: Yes.
- Financial sector taxes:
  - Streamline and rationalize financial sector taxes, including financial turnover taxes (stamp duty and transfer tax) and the asset tax, while also assessing the appropriateness of the higher corporate income tax rate of the regulated industry. Date: FY2018/19.

### Public sector transformation / Implementation Unit
- Fully staff the public sector transformation implementation unit, including appointment of its head by December 2016. Date: Dec-16.

### Shared Corporate Services
- Merge corporate back-office functions for Clarendon Alumina Production Limited (CAP) Services, Jamaica Bauxite Mining and Jamaica Bauxite Institute; corporate functions in CAP and JBM will cease to exist. Date: Mar-17.
- Identify positions affected in human resources and quantify implications through development of a costed transition plan and schedule. Date: May-17. Structural Benchmark: Yes.
- Commence implementation of HR shared corporate service arrangements. Date: Aug-17.
- Identify positions affected in Public Relations and Communications, and Internal Audit and quantify implications through development of a costed transition plan and schedule. Date: Nov-17. Structural Benchmark: Yes.

### Ongoing entities / Mergers and Divestments
- Complete the divestment of Caymanas Track Limited and the merger of the Cocoa Industry Board, the Coconut Industry Board and the Coffee Industry Board into the Jamaica Agricultural Commodities Authority (JACRA). Date: Mar-17.
- Merger: The Agricultural Credit Board and the Department of Cooperatives and Friendly Societies will be merged into the Agricultural Loan Societies and Approved Organizations. Date: Mar-17.

### Public bodies classification
- Complete review of the classification of all existing public bodies consistent with public financial management rules, including identifying and submitting to cabinet a time-bound plan for reintegration into parent ministries consistent with the principles of the Policy on public bodies. Date: Feb-17.

### Public service reform
- Compensation review:
  - Build a comprehensive database—by occupational grouping that includes all types of allowances paid, their amounts as well as the number of employees receiving each type of allowance in a given fiscal year—across ministries, departments, and agencies. Pilots ongoing. Database for all entities in the central government wage bill will be completed by March 2017. Date: Mar-17. Structural Benchmark: Yes.
  - Informed by compensation review results from end-March 2017, submit public sector wage negotiation framework to Cabinet for approval. Date: Apr-17. Structural Benchmark: Yes.
- Employee census:
  - Complete an employee verification exercise. Verification for all entities in the central government wage bill finalized by March 2017. Date: Mar-17. Structural Benchmark: Yes.
  - Submit policy options to cabinet for transition plans for employees currently outside of approved positions. Date: Apr-17.
- Recruitment rules:
  - Create and apply strict unambiguous rules for decisions of the Post Operations Committee regarding all types of employment including acting; rules to establish a percentage reduction rate to control employment. Date: Mar-17. Structural Benchmark: Yes.
- HCMES:
  - Complete roll-out of the human resources software (HCMES) for 14 entities. Date: Dec-18.
- Early retirement:
  - Pursue options for early retirement targeting the eligible population. Date: Mar-17.

### Tax Administration (TAJ)
- Staffing:
  - Completion of staffing of the Tax Administration of Jamaica (TAJ) as a Semi-Autonomous Revenue Authority (SARA) at the November 2015 staffing levels. All final offers are expected to be accepted by end-November 2016. Date: Nov-16.
- Training:
  - Training for audit managers will begin by November 2016 and is expected to be completed for all 50 audit managers by February 2017. Date: Feb-17.
- Compliance:
  - Improve efficiency of the large taxpayers’ office by completing 70 comprehensive audits and 11 issue audits and settling 90 objections. Date: Mar-17.
- Audit process:
  - Implement centralized organizational and reporting arrangements for objection units currently residing in regional services centers and the large taxpayers’ office to ensure objection decisions are carried out by officers outside of the Operations Division. Date: Mar-17.
- Transfer pricing:
  - Develop audit processes and procedures and a comprehensive work plan to focus on specified sectors/taxpayers/issues such as tourism and bauxite. Date: Apr-17.
- Client Services:
  - Begin issuing formal practice notes and private rulings to improve information to the taxpayer. Date: Apr-17.
  - By April 2017, work will begin on development of a database of legal opinions and guidance notes to be published on the TAJ website for taxpayers’ information by October 2017. Date: Oct-17.

### Customs Administration
- Post-Clearance Audit:
  - Increase the number of completed Post-Clearance Audit to 60 a year by March 2017, with 25 percent of them identified by risk management system. Date: Mar-17.
  - By March 2018, 50 percent of Post Clearance Audits will be identified by a risk management system. Date: Mar-18.
- Capacity:
  - Begin Tax Audit and Revenue Administration training for officers. Date: Dec-16.
- Trade facilitation:
  - Completion of drafting of Phase III under the latest amendments to the Customs Act by end-February 2016 and tabling in parliament by end-May 2017. Phase II will be tabled in Parliament by end-December 2016. Date: May-17.

### Public Financial Management (PFM)
- TSA Expansion / CTMS:
  - Put in place phase 1 of enhancements to Central Treasury Management System (CTMS), expected to be completed by end-December 2016. Begin web enablement of FinMan by January 2017 after all enhancements and job orders for CTMS are completed and signed off. Date: Jan-17.
  - Commence daily sweeps of all revenue transit accounts into the Treasury Single Account (TSA). Date: Mar-17.
- AGD capacity:
  - A new organizational structure for the Accountant General’s Department (AGD) was approved in September 2016.
  - Transfer of responsibility for further development and management of the CTMS from the MoFP to the AGD is ongoing and all positions and responsibilities will be permanently transferred to the AGD by end-November 2016. A service level agreement between the Bank of Jamaica and the Government for banking services provided by the central bank was signed in August 2016. After the circular is issued by the MOFP, full responsibility for the management of government accounts (except for IFI accounts) will be transferred to the AGD and 95 percent of all dormant and inactive accounts will be closed by December 2016. Date: Dec-16.
  - AGD will conduct a training needs assessment and develop a medium-term training program. Date: Jan-17.
- MOFP Staffing:
  - New organizational structure macro-fiscal capacity of the Ministry of Finance and the Public Service was approved in August 2016 and selection process of staff will begin shortly. Expect all final offers to be accepted by end-December 2016. Date: Dec-16.
- Procurement:
  - Begin staffing of new structure for Procurement and Asset Policy Unit; all final offers will be made by end-January 2017, including offers for helpdesk positions. Date: Jan-17.
  - Complete INPRI (International Procurement Institute) training for all 50 procurement officers in ministries. Date: May-17.
- Debt Management Capacity:
  - Reduce operational risk by ensuring adequate staffing of the Debt Management Branch (DMB)’s middle office. Date: Mar-17.
  - Ensure core staff at the MOFP’s Fiscal Policy Management Branch and the Debt Management Branch are trained in debt sustainability analysis (DSA) and medium-term debt management strategy (MTDS) modelling. Date: Mar-17.

### Market development and government debt market
- Prepare and publish a debt market development strategy in consultation with stakeholders to identify strategic medium-term priorities, next steps, and responsibilities; plan should describe strategy for reducing high dollarization of government debt. Date: Mar-17.
- Review and upgrade the primary dealer system with respect to primary dealer commitments and privileges in GOJ bonds to incentivize market making. Date: Mar-17.
- Reintroduce competitive auctions for GOJ bonds to enhance price-transparency and liquidity. Date: Jun-17.
- To create a more liquid T-bill market, anchor the yield curve and provide an accurate benchmark, expand issuance of T-bills and pursue dematerialization (i.e. switching from paper-form securities to electronic book-entry) of T-bills. Date: Jun-17.

### BOJ/GOJ coordination
- Revise collateral policy for liquidity provision by amending the BOJ Act to permit a more granular approach to the treatment of GOJ securities; increase the collateral value of T-bills and BOJ CDs so as to better reflect the risk of underlying assets. Date: Sep-17.
- Institute more frequent meetings between the MOFP, the BOJ, and the AGD to discuss liquidity conditions around planned issuances and/or redemptions and to develop a comprehensive internal strategy for dealing with major domestic market redemptions, including possible liability management operations. Discuss impact of strategies (repayments, rollovers, buybacks, and exchanges) on domestic liquidity and FX conditions. Date: Dec-17.

### Social Safety Net
- National Identification System (NIDS):
  - Put in place an initial team of project specialists spanning procurement, legal, business process review, and ICT; final job offers will be made by end-November 2016. Date: Nov-16.
  - A Memorandum of Understanding with eGov Jamaica Ltd. will be signed by end-November 2016 to secure a core team from eGov in the NIDS project. Date: Nov-16.
  - Establish a Procurement Team including a Procurement Specialist, eGov representatives, ICT Specialist, NIDS Project Manager, NIDS Subject Matter Expert, and Legal Officer and issue tender. Date: Dec-16.
- PATH coverage:
  - Conclude the targeting assessment and benefits review for PATH. Date: Mar-17.
  - Increase funding for the School Feeding Program in the FY2017/18 budget and identify resources to augment program days and increase the resources per child/per meal. Date: Mar-17.
- PATH graduation:
  - Upon cabinet approval of the graduation strategy for PATH households, initiate evaluation of households’ ability to exit the program and begin delivery of interventions for the first group of families scheduled for graduation from PATH. Date: Mar-17.
- PATH efficiency and effectiveness:
  - Review impact of PATH benefits on improving school attendance; review conducted by the Ministry of Labor and Social Security to inform redesign of the scheme. Date: June-17.

### Exchange rate / FX market
- The BOJ, with support from IMF TA, to develop modalities to improve price discovery in the FX market through introduction of multiple-price FX auctions for BOJ buying and selling from the market:
  - By March 2017, draft internal guidelines for the auctions and develop and implement an outreach campaign to explain new modality to market participants. Date: Mar-17.
  - Implement multiple-price FX auctions for the BOJ buying and selling from the market. Date: Jun-17.

### Monetary policy
- Liquidity provision and dollarization:
  - Continue to remove the bias in the cash reserve requirement structure that favors foreign currency deposits by gradually equalizing the cash reserve and liquid asset reserve requirements for foreign currency and domestic currency deposits in the banking system; the next step in the equalization will occur November 2016. Date: Nov-16.
  - Begin fortnightly meetings between the Cash Management Unit with the BOJ and MOFP to ensure accuracy of liquidity forecasts and aid in liquidity management. Date: Nov-16.
  - Conduct cost-benefit analysis on imposing stricter cash reserve and liquid asset reserve requirement on foreign currency liabilities. Date: Mar-17.
  - Guided by IMF TA, the BOJ will improve the effectiveness of its open market operations and liquidity assurance framework by making the overnight interest rate its policy rate by June 2017. This transition has begun with an adjustment of the interest rate on its overnight deposit facility from

*Source: _cr16350 - 17. We have also devised a strategy to increase financial inclusion. This strategy, which has (PDF).*

### 0.25 percent to 3 percent

### 0.25 percent to 3 percent

### BOJ governance, balance sheet, and operating reforms
- Assessment and reform plan:
  - The BOJ, with IMF TA, will conduct an assessment of its operating requirements and related cost structure, capital position and revenue requirements, and propose a reform plan that can be supported by the MOFP. (Jun-17)
- BOJ Act revisions:
  - Submit revisions of the BOJ Act to Parliament to improve central bank governance and independence, in line with IMF recommendations. Revisions will modernize arrangements for paying dividends, appointments to the BOJ Board, and provisions of central bank financing to the government. (Sep-17) — Status: Yes

### International reserves
- Phase-out and targets:
  - Steadily phase-out the surrender requirements and borrowed reserves.
  - By end of program, achieve at least 100 percent of ARA metrics and increase the proportion of non-borrowed reserves in NIR through market-based FX purchases. (Dec-19)

### Financial sector — securities dealers, supervision, and crisis resolution
- Securities dealers (SDs) and foreign investment caps:
  - BOJ will monitor market conditions and compliance with existing foreign investment limits and assess readiness to lift the investment cap for CIS and SDs further from current level of 25 percent. (Ongoing)
  - Require all securities dealers to conduct regular stress tests and submit test results. (Dec-16)
- Retail repo, counterparty exposure, and MRRA:
  - Implement a minimum retail repo leverage ratio by April 2019; begin consultations by end-October 2016 and devise a draft plan by January 2017. (Jan-17)
  - With goal of implementing a limit of 25 percent on exposure to counterparty by 2019; begin consultations by end-October 2016 and draft plan by January 2017. (Jan-17)
  - Institute mechanisms to ensure full compliance with the Securities (Retail Repurchase Agreement) Regulations requiring "retail repos" to be governed by a MRRA signed by both dealer and client. (May-17) — Status: Yes
- Consolidated supervision and FHC regime:
  - Suite of regulations for FHC and consolidated supervision to be shared with industry by end-November 2016; drafting instructions prepared by March-2017. (Nov-16)
- Coordination and crisis resolution:
  - Operationalize Financial System Stability Committee by finalizing appointment of two external members. (Nov-16) — Status: Yes
  - Issue for public comment a consultation paper for the resolution framework, developed with support from IMF TA, which describes the draft legislation. (Feb-17) — Status: Yes
  - Submit to Cabinet by May-2017 proposals for legislation to enhance the resolution framework for the financial sector. (May-17)
  - Prepare drafting instructions for the CPC, based on the draft legislation, incorporating revisions from public consultation and feedback received on the cabinet proposal. (Jun-17)
  - Submit legislation to Parliament for enactment and implement regulations. (Dec-17)

### Financial inclusion, deposit insurance, and related laws
- Financial inclusion:
  - Establish a financial inclusion council to implement the Cabinet-approved umbrella financial inclusion strategy for the period 2016-20. (Mar-17) — Status: Yes
  - Table a Micro Credit Act in Parliament. (Dec-17)
  - Review the Credit Reporting Act to encourage increased participation of data providers in the credit reporting system and propose amendments, if any, to Cabinet. (Dec-18)
- Deposit insurance and depositor protection:
  - Legislation to amend the Cooperative Societies Act will be tabled in Parliament by end-April 2017. (Apr-17)
  - Update the Proposal for the Establishment of Compensation Schemes for non-DTIs by November 2017 to strengthen depositor protection and investor compensation including credit union depositors. (Nov-17)

### Structural reforms: macroeconomic, public safety, access to finance, business climate, asset utilization, diaspora
- Macroeconomic stability:
  - Create framework for public debt reduction through a program of privatizations and asset sales. (Mar-17)
- Citizen security and public safety (multiple measures with target dates):
  - Submit to Cabinet plan for rationalization of police stations, redeployment of assets into high-crime areas, and a more mobile policing strategy. (Mar-17)
  - Implement measures to allow witnesses to record statements and give evidence via video-link. (Mar-17)
  - Improve border security and monitoring of air and maritime space through initial acquisition of surveillance aircraft and marine patrol vessels leading toward a Domain Awareness Centre. (Mar-17)
  - Implement full legislative review leading to tabling in Parliament of:
    - New Police Service Act to replace Jamaica Constabulary Force Act;
    - Legislation to establish the Major Organized Crime and Anti-Corruption Agency;
    - Legislation to merge the Corruption Prevention Commission, the Integrity Commission and the Office of the Contractor General into a single Anti-Corruption Agency.
    (Oct-17)
  - Subject to Constitutional Court ruling, extend Proceeds of Crime legislation to include all FATF designated non-financial businesses and professions, including lawyers (consistent with attorney-client privileges), by way of ministerial order subject to affirmative resolution or other legislative means. (Oct-17)
  - Submit to Cabinet a proposal for a comprehensive information system for the JCF, including live feeds from CCTV to area-based control rooms and proper electronic crime and incident-recording procedures feeding into real-time data analytics. (Oct-17)
  - Submit to Cabinet a comprehensive plan for normalizing and reintegrating informal settlements, ‘garrisons’ and high-crime communities. (Oct-17)
- Access to finance:
  - Finalize Terms of Reference for Banking Competition Review. (Dec-16)
  - Commence phased reviews of banking, insurance and pensions regulations that impact access to finance by March 2017; implementation of changes in selected sectors by June 2017. (Jun-17)
  - Expand the size of the partial credit guarantee programme at the Development Bank of Jamaica. (Mar-17)
- Business climate and red-tape:
  - Begin regulatory review of licensing, permitting and regulatory processes in fisheries, veterinary, agricultural, pharmaceutical, health and quality control divisions aimed at boosting efficiency and business competitiveness. (Mar-17)
  - Complete the Public Procurement Regulations and the Handbook of Public Sector Procurement Procedures. (Mar-17)
  - Implement electronic submission of development approval applications and mandatory use of AMANDA system for development approvals with staged milestones:
    - Table amendments to the Town and Country Planning Act and Local Improvements Act and regulations in Parliament by May 2017;
    - Complete Public Portal Module II by September 2017;
    - Complete upgrade of infrastructure to all Local Authorities and commenting agencies by December 2017. (Dec-17)
  - Complete improvements to Development Approval Process including:
    - Finalization of National Spatial Plan by October 2017;
    - Tabling in Parliament of the Building Act by March 2017;
    - Completion of Development Orders for all parishes by October 2017. (Oct-17)
- Asset utilization and privatization process improvements:
  - Submit to cabinet plan to divest up to 20% of assets held by the UDC and Factories Corporation of Jamaica. (Mar-17)
  - Improve scalability and efficiency of privatization, asset sale and PPP processes by:
    - Increasing number of Account Executives at the DBJ who handle such transactions (to X),
    - Dedicated staffing at the AG’s chambers and the Ministry of Finance exclusively focused on these transactions,
    - Establish permanently staffed Enterprise Team,
    - Submit to cabinet protocol and framework for outsourcing privatizations to for-profit firms. (Mar-17)
- Diaspora involvement:
  - Begin feasibility study on institutional framework for promoting, coordinating and organizing economic and social investments by the Diaspora. (Mar-17)
  - Begin feasibility study of creation of a Global Jamaican Immigration Card for issuance to members of the Diaspora. (Mar-17)

### Schedule of reviews and purchases (SDR amounts and % Quota)
- Available on or after / Amount of Purchase / % Quota / Conditions:
  - November 11, 2016 — 300.1 — 78 — Approval of Arrangement
  - March 15, 2017 — 126.0 — 33 — First Review and end-December 2016 performance criteria
  - September 15, 2017 — 126.0 — 33 — Second Review and end-June 2017 performance criteria
  - March 15, 2018 — 160.8 — 42 — Third Review and end-December 2017 performance criteria
  - September 15, 2018 — 160.8 — 42 — Fourth Review and end-June 2018 performance criteria
  - March 15, 2019 — 160.8 — 42 — Fifth Review and end-December 2018 performance criteria
  - September 15, 2019 — 160.8 — 42 — Sixth Review and end-June 2019 performance criteria
- Total: 1195.3 SDR millions, 312 % Quota
- Note: Apart from periodic performance criteria, conditions also include continuous performance criteria.

### Key fiscal and indicative quantitative targets (values preserved exactly as presented)
- Fiscal performance criteria (cumulative flows from April 1 through March 31):
  - 1. Primary balance of the central government (floor) 3/: End-Dec 54.0, end-Mar 123.0, end-June 13.4, end-Sep 38.1, end-Dec 61.0
  - 2. Overall balance of the public sector (floor) 3/: End-Dec -51.5, end-Mar -17.2, end-June -41.4, end-Sep -46.9, end-Dec -55.0
  - 3. Net increase in the central government guaranteed debt (ceiling) 3/: End-Dec 0.0, end-Mar 0.0, end-June 0.0, end-Sep 0.0, end-Dec 0.0
  - 4. Central government accumulation of domestic arrears (ceiling) 4/ 10/ 11/: End-Dec 0.0, end-Mar 0.0, end-June 0.0, end-Sep 0.0, end-Dec 0.0
  - 5. Central government accumulation of tax refund arrears (ceiling) 5/ 10/ 11/: End-Dec 0.0, end-Mar 0.0, end-June 0.0, end-Sep 0.0, end-Dec 0.0
  - 6. Consolidated government accumulation of external debt payment arrears (ceiling) 4/ 10/: End-Dec 0.0, end-Mar 0.0, end-June 0.0, end-Sep 0.0, end-Dec 0.0
- Indicative targets:
  - 7. Tax revenues of the central government (floor) 3/ 7/: End-Dec 300.0, end-Mar 440.0, end-June 100.0, end-Sep 218.0, end-Dec 330.0
  - 8. Change in the stock of public bodies non-guaranteed debt (ceiling) 7/ 12/: End-Dec -1.0, end-Mar 2.3, end-June 7.6, end-Sep -7.0, end-Dec -4.1
  - 9. Central government spending on social programs (floor) 3/ 7/ 8/: End-Dec 16.4, end-Mar 24.3, end-June 5.0, end-Sep 10.2, end-Dec 17.3
  - 10. Total loan value of all user funded PPPs (ceiling, percent of GDP): 3.0, 3.0, 3.0, 3.0, 3.0
- Monetary targets:
  - 11. Stock of non-borrowed net international reserves (floor) 6/ 9/ (In millions of U.S. dollars): End-Dec 1,428, end-Mar 1,475, end-June 1,521, end-Sep 1,637, end-Dec 1,777
  - 12. Monetary policy consultation clause (in percent):
    - Upper band: 9.0, 9.0, 9.0, 9.0, 9.0
    - Center inflation target: 5.5, 5.5, 5.5, 5.5, 5.5
    - Lower band: 1.0, 2.0, 2.0, 2.0, 2.0

### New structural program conditionality — timing (selected items)
- Selected timing commitments:
  - Complete new rates and bands for property taxes using 2013 land valuations and submit to Cabinet. (December 31, 2016)
  - Operationalize Financial System Stability Committee by finalizing appointment of two external members. (November 30, 2016)
  - Issue for public comment a consultation paper for the resolution framework. (February 28, 2017)
  - Establish a financial inclusion council. (March 31, 2017)
  - Ensure MRRA compliance for retail repos. (May 30, 2017)
  - Submit BOJ Act revisions to enhance governance to Parliament. (September 30, 2017)
  - Build comprehensive allowances database and complete by March 2017 for all central government wage-bill entities. (March 31, 2017)
  - Complete an employee verification exercise for central government wage-bill entities. (March 31, 2017)
  - Create strict rules for Post Operations Committee employment decisions. (March 31, 2017)
  - Submit public sector wage negotiation framework to Cabinet. (April 30, 2017)
  - Identify positions affected by shared corporate services in HR and develop costed transition plan. (May 30, 2017)
  - Identify positions affected by shared services in Public Relations, Communications, and Internal Audit and develop costed transition plan. (November 30, 2017)

### Technical Memorandum of Understanding (TMU) — definitions and exchange rates
- General TMU points:
  - TMU sets definitions of quantitative performance criteria and indicative targets for programme supported by precautionary Stand-By Arrangement (SBA).
  - Programme exchange rates are those that prevailed on August 31, 2016; all foreign currency-related assets, liabilities and flows evaluated at “programme exchange rates” except items affecting government fiscal balances, which are measured at current exchange rates.
- Program exchange rates (End-August, 2016; 1/ Average daily selling rates at the end of August 2016):
  - Jamaican dollar to the US dollar 127.57
  - Jamaican dollar to the SDR 178.07
  - Jamaican dollar to the Euro 144.50
  - Jamaican dollar to the Canadian dollar 98.73
  - Jamaican dollar to the British pound 167.23
- Definitions excerpts:
  - Central government for programme purposes consists of institutions currently covered under the state budget and includes public bodies financed through the Consolidated Fund.
  - Fiscal year: April 1 to March 31.
  - Primary balance defined as total revenues minus primary expenditure (non-interest activities). Revenues recorded when funds transferred to a government revenue account and include grants. Capital revenues exclude proceeds from divestment operations. Primary expenditure recorded on a cash basis and includes compensation, other recurrent expenditures and capital spending; government-funded PPPs treated as on-budget investment during construction phase.

*Italic: Content derived from the IMF document _cr16350 - 0.25 percent to 3 percent_*

### 7. All primary expenditures directly settled with bonds or any other form of non-cash liability

### _cr16350 - 7. All primary expenditures directly settled with bonds or any other form of non-cash liability

### Primary expenditures settled with bonds / non-cash liabilities
- All primary expenditures directly settled with bonds or any other form of non-cash liability will be recorded as spending above-the-line, financed with debt issuance and will therefore affect the primary balance.

### Growth-enhancing projects accommodated by fiscal target adjustment
- A 0.5 percent of GDP reduction in the central government primary surplus target for FY2016/17 accommodates the following growth-enhancing projects as part of primary expenditures:
  - Rural Economic Development Initiatives (REDI)
  - Rehabilitation of Irrigation Infrastructure (NIC)
  - Islandwide Flood Damage Mitigation & Vector Control
  - Road Rehabilitation Project II
  - Major Infrastructure Development Programme (MIDP)
  - Support to SMEs Sector
  - Support to PIMC Pipeline Projects
  - Contingency for Natural Disaster/Infrastructural Rehabilitation
  - BPO Expansion – Portmore and Montego Bay
  - Fiscal Administration Modernization Programme (FAMP)
  - Strategic Public Sector Transformation Project
  - Pilot Programme for Climate Resilience (PPCR II)
  - Sugar Transformation Programme
  - Agricultural Competitiveness Project
  - Jamaica Foundations for Competitiveness & Growth
  - Expansion/upgrading of educational Institutions Infrastructure
  - Build-out of the Accountant General Department Offices
  - Upgrading of the Jamaica Conference Centre
  - Upgrading of the water distribution system – National Arena Facility
  - Upgrading of water supply system – Bellevue Hospital
  - University of Technology Enhancement Project (building and infrastructure development)
  - Irrigation infrastructure for Trelawny Stadium
  - Major Rural Farm Roads Rehabilitation
  - Production Incentives Programme
  - Improvement in national security (emergency procurement of equipment)

### Reporting for primary expenditures and related fiscal data
- Data will be provided to the Fund with a lag of no more than six weeks after the test date.

### Specified Public Sector (SPS) definition and coverage for public sector balance
- The public sector for these measures refers to the “Specified Public Sector” (SPS) as defined under the Fiscal Responsibility Law (FRL):
  - SPS consists of the central government and self-financed public bodies that are not deemed “commercial” by the Office of the Auditor General (OAG), based on the set of legislated criteria.
  - SPS excludes the Bank of Jamaica (BOJ).
- The TMU will be updated when the formal assessment by the OAG of the commercial nature of public bodies is completed by April 1, 2017.
- Until completion of the OAG assessment and for the purposes of the SBA, the SPS will consist of the central government and the public bodies listed below.

### Self-financed public bodies included in SPS (for the purposes of the SBA)
- AEROTEL; Airports Authority of Jamaica; Betting, Gaming and Lotteries Commission; Broadcasting Commission; Bureau of Standards; Caymanas Track Limited (to be divested by end FY 2016/17); CHASE; Clarendon Alumina Production Limited; Coconut Industry Board; Coffee Industry Board; Development Bank of Jamaica Limited; Factories Corporation of Jamaica; Financial Services Commission; Firearm Licensing Authority; Harmonisation Limited; HEART Trust-NTA; Housing Agency of Jamaica Limited; Jamaica Bauxite Institute; Jamaica Bauxite Mining; Jamaica Civil Aviation Authority; Jamaica Deposit Insurance Corp.; Jamaica International Freezone Limited; Jamaica Mortgage Bank; Jamaica National Accreditation Agency; Jamaica Racing Commission; Jamaica Railway Corporation; Jamaica Ultimate Tyre Company Limited; Jamaica Urban Transport Company Limited; Kingston Free Zone Limited; Micro Investment Development Agency; Montego Bay Free Zone; Montego Bay Metro Limited; National Export Import Bank of Jamaica - EX-IM Bank; National Health Fund; National Housing Trust; National Insurance Fund; National Water Commission; National Road Operating and Constructing; Ocho Rios Commercial Centre Limited; Office of Utilities Regulation; Overseas Examination Commission; PetroCaribe Development Fund (PCDF); PetroJam Ethanol Limited; Petrojam Limited; Petroleum Corporation of Jamaica; Port Authority Management Service Limited; Port Authority of Jamaica; Ports Management and Security Limited; Ports Security Corps Limited; Postal Corporation of Jamaica; Public Accountancy Board; Road Maintenance Fund; Runaway Bay Water Company Limited; SCJ Holdings Limited; Self Start Fund; Spectrum Management Authority; Sports Development Foundation; St Ann Development Company Limited; Student Loan Bureau; Sugar Industry Authority; Tourism Enhancement Fund; Transport Authority; Universal Service Fund; Urban Development Corporation; Wigton Windfarms Limited.

### Calculation and treatment of overall balance of public bodies and public sector
- The overall balance of public bodies will be calculated from the Statement A’s provided by the Public Enterprises Division of the Ministry of Finance and the Public Service (MoFPS) for each of the public bodies as defined above.
- Definition of overall balance used: operational balance, plus capital account net of revenues (investment returns, minus capital expenditure, plus change in inventories), minus dividends and corporate taxes transferred to government, plus net other transfers from government.
- For the National Housing Trust and the House Agency of Jamaica, capital account revenues will not be netted out (they will be included among recurrent revenue).
- The group of self-financed public bodies will be adjusted as public bodies’ rationalization, divestments and mergers advance; adjustments will not affect the performance criterion unless specifically stated.
- All newly created entities, including from mergers, will be incorporated into this group.
- The overall balance of the public sector is calculated as the sum of central government overall balance and the overall balance of the public bodies listed above.
- Reporting: Data will be provided to the Fund with a lag of no more than six weeks after the test date.

### Adjuster for PetroJam performance (floor on overall public sector balance)
- The floor for the overall public sector balance (cumulative since the beginning of the fiscal year) will be adjusted downward (upward) by an amount equivalent to the shortfall (excess) of PetroJam’s overall balance (relative to baseline projections in Table 2), with the value of the adjustment at the end of any quarter capped at US$35 million, converted at the programme exchange rates.

### Ceiling on net increase in central government guaranteed debt
- Definition: Net increase in central government guaranteed debt = issuance minus repayments of central government guaranteed debt, in billions of Jamaican dollars, including domestic and external bonds, loans and all other types of debt.
- Foreign currency debt will be converted to Jamaican dollars at the programme exchange rate.
- Central government guaranteed debt does not cover loans to public entities from the PetroCaribe Development Fund because of consolidation.
- The cumulative net increase in central government guaranteed debt will be monitored on a continuous basis.
- Reporting: Data will be provided to the Fund with a lag of no more than six weeks after the test date.
- Adjuster: If central government debt guarantees are called, the stock of central government guaranteed debt will be adjusted downwards in both the end-March of each year and the target date to preserve the performance criteria.

### Ceiling on central government accumulation of domestic arrears
- Definition: Domestic arrears = payments to residents determined by contractual obligations that remain unpaid 90 days after the due date; due date refers to the date domestic debt payments are due according to the relevant contractual agreement, taking into account contractual grace periods.
- Central government domestic arrears include arrears on domestic central government direct debt, including to suppliers and all recurrent and capital expenditure commitments.
- Accumulation is measured as the change in the stock of domestic arrears relative to the stock at end-March 2016, which stood at J$21.0 billion.
- The ceiling on central government accumulation of domestic arrears will be monitored on a continuous basis.
- Reporting: Data will be provided to the Fund with a lag of no more than six weeks after the test date.

### PetroJam baseline overall balance (Table 2)
- In billions of Jamaican dollars:
  - End-December 2016-2.3
  - End-March 2017-1.0
  - End-June 2017-1.2
  - End-September 2017...
  - End-December 2017...

### Non-accumulation of external debt payments arrears (consolidated government and BOJ)
- Consolidated government includes the central government and the public bodies as defined in sections A and B.
- External debt is determined according to the residency criterion.
- Definition of “debt”: a current (not contingent) liability created under a contractual arrangement that requires the obligor to make one or more payments in the form of assets or services at future dates. Principal forms include:
  - Loans (including deposits, bonds, debentures, commercial loans, buyers’ credits, repurchase agreements and official swap arrangements)
  - Suppliers’ credits
  - Leases (debt is the present value at lease inception of all lease payments expected during the agreement, excluding payments for operation, repair or maintenance)
- Under this definition, arrears, penalties and judicially awarded damages arising from failure to pay contractual obligations that constitute debt are debt. Failure to make payment on an obligation not considered debt under this definition (e.g., payment on delivery) will not give rise to debt.
- External payments arrears: arrears of external debt obligations (principal and interest) falling due after November 11, 2016 that have not been paid at the time due, taking into account contractual grace periods. Arrears from obligations for which a clearance framework has been agreed or a rescheduling agreement is being sought are excluded.
- The consolidated government and the BOJ will accumulate no external debt payment arrears during the programme period.
- The stock of external arrears of the consolidated government and the BOJ will be calculated based on the schedule of external payment obligations reported by the MoFP, reconciled with relevant creditors and adjusted as necessary.
- This performance criterion does not cover arrears on trade credits.
- The performance criterion will apply on a continuous basis.
- Reporting: The MoFP will provide final data on the stock of external arrears of the consolidated government and the BOJ to the Fund, with a lag of not more than six weeks after the test date.

### Ceiling on central government accumulation of tax refund arrears
- Definition: Tax refund arrears = obligations on tax refunds in accordance with tax legislation that remain unpaid 90 days after the due date.
- Accumulation is measured as the change in the stock of tax refund arrears relative to the stock at end-March 2016, which stood at J$17.3 billion.
- Central government accumulation of tax refund arrears will be monitored on a continuous basis.
- Reporting: Data will be provided to the Fund with a lag of no more than six weeks after the test date.

### Floor on the stock of Non-Borrowed Net International Reserves (NIR)
- Definitions:
  - Net international reserves (NIR) of the BOJ (NIR-BOJ) = U.S. dollar value of gross foreign assets of the BOJ minus gross foreign liabilities with maturity of less than one year.
  - Non-borrowed NIR = NIR-BOJ minus all foreign currency liabilities issued by the BOJ and held by residents.
  - Non-U.S. dollar denominated foreign assets and liabilities will be converted into U.S. dollar at the programme exchange rates.
- Gross foreign assets are defined consistently with BPM6 and include: monetary gold, SDR holdings, foreign currency cash, foreign currency securities, liquid balances abroad and the country’s reserve position at the Fund. Excluded from reserve assets: pledged/collateralized/encumbered assets, claims on residents, claims in foreign exchange arising from derivatives vis-à-vis domestic currency, precious metals other than gold, assets in nonconvertible currencies and illiquid assets.
- Gross foreign liabilities of the BOJ include all foreign exchange liabilities to nonresidents, commitments to sell foreign exchange arising from derivatives, and all credit outstanding from the Fund, but exclude credit transferred by the Fund into a Treasury account to meet the government’s financing needs directly. In deriving NIR, credit outstanding from the Fund is subtracted from foreign assets of the BOJ.
- Reporting: Data will be provided by the BOJ to the Fund with a lag of no more than ten days past the test date.

### Adjusters to non-borrowed NIR targets (Table 3 baseline projections)
- Non-borrowed NIR targets will be adjusted upward (downward) by the surplus (shortfall) in:
  - Programme loan disbursements from multilateral institutions (the IBRD, IDB and CDB) and commercial loans guaranteed by multilateral sources, relative to the baseline projection in Table 3.
  - Disbursements of budget support grants relative to the baseline projection in Table 3.
- Programme loan disbursements are external loan disbursements from official creditors usable for financing the consolidated government.
- Cumulative flows from the beginning of the fiscal year (In millions of US$) — External loans from multilateral sources:
  - End-December 2016 202
  - End-March 2017 217
  - End-June 2017 21
  - End-September 2017 92
  - End-December 2017 214
  - End-March 2018 235
- Budget support grants (In millions of US$):
  - End-December 2016 0
  - End-March 2017 0
  - End-June 2017 0
  - End-September 2017 0
  - End-December 2017 0
  - End-March 2018 0
- Commercial loans guaranteed by multilateral sources (In millions of US$):
  - End-December 2016 0
  - End-March 2017 0
  - End-June 2017 300
  - End-September 2017 0
  - End-December 2017 0
  - End-March 2018 0

### Performance criterion on multiple currency practices (MCP)
- The performance criterion on the introduction or modification of multiple currency practices (MCP) will exclude the introduction or modification in 2017 of a multiple-price foreign exchange auction system, developed in line with Fund staff advice, that may give rise to a MCP.

### Quantitative indicative targets — definitions of selected variables
- Cumulative Floor on Central Government Tax Revenues:
  - Definition: Tax revenues = revenues from tax collection; excludes revenues from asset sales, grants, bauxite levy and non-tax revenues.
  - The programme will have a floor on central government tax revenues (indicative target) calculated as the cumulative flow from the beginning to the end of the fiscal year (April 1 to March 31).
  - Reporting: Data will be provided to the Fund with a lag of no more than six weeks after the test date.
- Ceiling on the Change in the Stock of Public Bodies’ Non-Guaranteed Debt:
  - Definition: Non-guaranteed debt of public bodies includes all consolidated domestic and external bonds and other forms of debt by all self-financed public bodies that is not guaranteed by the central government or any other public entity.
  - Target set in Jamaican dollars with foreign currency debt converted using the programme exchange rate.
  - Change measured “below the line” as debt issuance minus repayments on all non-guaranteed debt by public bodies.
  - Debt issues recorded at the moment funds are credited to the account of the corresponding public body; stock measured net of cross-holdings between public bodies.
  - Reporting: Data will be provided to the Fund with a lag of no more than six weeks after the test date.
  - Adjusters:
    - Target adjusted downwards if the government assumes part of previously non-guaranteed debt or if an entity with non-guaranteed debt is divested/privatized.
    - Target adjusted downward (upward) by an amount equivalent to the shortfall (excess) of PetroJam’s overall balance (relative to baseline projections in Table 2), with the value of the adjustment at the end of any quarter capped at US$35 million, converted at the programme exchange rates.
- Floor on Central Government Spending on Social Programmes:
  - Definition: Social spending = sum of central government spending on social protection programmes as articulated in the central government budget for a fiscal year.
  - Social programmes comprise conditional cash transfers to children 0–18 years and the elderly; youth employment programmes; the poor relief programme for both indoor and outdoor poor; the school feeding programme; and the basic school subsidy.

*International Monetary Fund — content as presented in the supplied source document.*

### 50. In particular, this target comprises spending on specific capital and recurrent

### _cr16350 - 50. In particular, this target comprises spending on specific capital and recurrent

### Capital expenditure: specified programmes included in the target
- Youth employment programmes comprising on the job training, summer employment and employment internship programme.
- Conditional cash transfers comprising children health grant, children education grants, tertiary level, pregnant and lactation grants, disabled adult grants, adult under 65 grants and adults over 65 grants.
- Poor relief programme.

### Recurrent expenditure: specified programmes included in the floor on social and security expenditure
- School feeding programmes including operating costs.
- Poor relief (both indoor and outdoor) including operating costs.
- Golden Age Homes.
- Children’s home, places of safety and foster care including operating cost.
- Career Advancement Programme.
- National Youth Service Programme.

### Reporting for social spending target
- Data will be provided to the Fund with a lag of no more than six weeks after the test date.

### Ceiling on User-Funded PPPs
- Definition: User-funded PPPs are concessions in which users are expected to be the main source of revenue.
- Exclusion criterion: The loan value of a PPP may be excluded if the Office of the Auditor General has established that the PPP involves only minimal contingent liabilities (by demonstrating that the project has no debt guarantee, demand or price guarantees or termination clauses that could imply a transfer of liabilities to the government).
- Stock statistic: The total value of user-funded PPPs at end-September 2016 stood at US$260 million or 1.9 percent of GDP.
- Reference GDP for the condition: For FY2016/17, the projected nominal GDP used as a reference is J$1,726 billion, as presented in Table 2H, part 2, Macroeconomic Framework, page 34.
- Reporting: Data will be provided to the Fund with a lag of no more than six weeks after the test date.

### Monetary Policy Consultation Clause (definitions, reporting, and trigger)
- Inflation definition: Inflation is defined as the change over 12 months of the end-of-period headline consumer price index, as measured and published by the Statistical Institute of Jamaica (STATIN).
- Reporting: Data will be provided to the Fund with a lag of no more than six weeks after the test date.
- Consultation trigger: Breaching the inflation consultation band limits (as specified in the TMU, Table 4) at the end of each June/December test dates would trigger a consultation with the IMF’s Executive Board on the reasons for the deviation and the proposed policy response before further purchases could be requested under the SBA.
- Consultation content requirements:
  - (i) the stance of monetary policy and whether the Fund-supported program remains on track;
  - (ii) the reasons for deviations from the specified band, taking into account compensating factors;
  - (iii) proposed remedial actions, as deemed necessary.

### Information requirements and reporting frequency
- Daily (to be reported with the frequency implied by "Daily"):
  - Net international reserves; nominal exchange rates; interest rates on BOJ repurchase agreements; total currency issued by the BOJ; deposits held by financial institutions at the BOJ; outstanding stock of foreign currency CDs to residents by maturity; required and excess reserves of the banking sector in local and foreign currency; total liquidity assistance to banks through normal BOJ operations, including overdrafts; overnight interest rates; GOJ bond yields.
  - Disbursements from the Financial System Support Fund, by institutions.
  - Liquidity assistance to institutions from the BOJ by institution.
  - Bank of Jamaica purchases and sales of foreign currency, by transaction type (surrenders, public sector entities facility and outright purchases or sales including interventions).
  - Amounts offered, demanded and placed in Bank of Jamaica open market operations, including rates on offer for each tenor and amounts maturing for each tenor.
  - Amounts offered, demanded and placed in government of Jamaica auctions and primary issues; including minimum maximum and average bid rates.
  - Daily foreign currency government of Jamaica debt payments (domestic and external).

- Weekly:
  - Balance sheets of the core securities dealers (covering at least 70 percent of the market), including indicators of liquidity (net rollovers and rollover rate for repos and a 10-day maturity gap analysis), capital positions, details on sources of funding, including from external borrowing on margin and clarity on the status of loans (secured vs. unsecured). Weekly reports will be submitted within 10 days of the end of the period.
  - Deposits in the banking system and total currency in circulation.

- Monthly (reporting lags specified):
  - Central government operations including monthly cash flow from the beginning to the end of the current fiscal year (and backward revisions as necessary), with a lag of no more than six weeks after the closing of each month.
  - Public entities’ Statement A: consolidated and by institution for the self-financed public bodies defined in I.B with a lag of no more than six weeks after the closing of each month.
  - Central government debt amortization and repayments (J$-denominated and US$-denominated bonds, treasury bills, Eurobonds, domestic loans, external commercial and external official loans). Includes government direct, government guaranteed and total. In the case of issuance of government guaranteed debt, include the name of the guaranteed individual/institution. The reporting lag should not exceed six weeks days after the closing of each month.
  - Amortization and repayments of public bodies’ non-guaranteed debt for each of the Selected Public Bodies listed in I.B.
  - Balances of the Consolidated Fund and main revenue accounts needed to determine the cash position of the government.
  - Stock of central government expenditure arrears.
  - Stock of central government tax refund arrears.
  - Stock of central government domestic and external debt arrears and BOJ external debt arrears.
  - Central government spending on social protection as defined for the indicative target on social spending.
  - Central government debt stock by currency, as at end month, including by (i) creditor (official, commercial domestic, commercial external; (ii) instrument (J$-denominated and US$-denominated bonds, treasury bills, Eurobonds, domestic loans, external commercial and external official loans); (iii) direct and guaranteed. The reporting lag should not exceed six weeks after the closing of each month.
  - The maturity structure of Government debt (domestic and external). The reporting lag should not exceed six weeks after the closing of each month.
  - Legal measures that affect the revenue of the central government (tax rates, import tariffs, exemptions, etc.).
  - Balance sheet of the Bank of Jamaica within three weeks of month end.
  - A summary of monetary accounts providing detailed information on the accounts of the Bank of Jamaica, commercial banks and the overall banking system. Including Bank of Jamaica outstanding open market operations by currency and maturity and a detailed decomposition on Bank of Jamaica and commercial bank net claims on the central government, and self-financed public bodies. This information should be received with a lag of no more than six weeks after the closing of each month.
  - Data on the total loans value of all new user-funded PPPs, specifying the PPPs identified by the Office of the auditor General as involving only minimal contingent liabilities (including the absence of debt guarantees, demand or price guarantees or termination clauses that could imply a transfer of liabilities to the government).
  - Issuance of exempt distributions by financial and non-financial corporations, six weeks after month end.
  - Imports and exports of goods, in US$ million within twelve weeks after month end.
  - Tourism indicators within four weeks after month end.
  - Remittances’ flows within four weeks after month end.
  - Consumer price inflation, including by sub-components of the CPI index within four weeks after month end.
  - The balance sheet of the PetroCaribe Development Fund with a lag of no more than six weeks after the closing of each month.

- Occasional monthly items (reporting lags specified):
  - Profits of the Bank of Jamaica on a cash and accrual basis, including a detailed decomposition of cash profits and profits from foreign exchange operations with a lag of no more than three weeks from month end.
  - Deposits in the banking system: current accounts, savings and time deposits within six weeks after month end.
  - Average monthly interest rates on loans and deposits within two weeks of month end; weighted average deposit and loan rates within six weeks after month end.
  - Financial statements of core securities dealers and insurance companies within six weeks of month end.
  - The maturity profile of assets and liabilities of core securities dealers in buckets within six weeks of month end.
  - Data on reserve liabilities items for NIR target purposes (Table 9) within three weeks after month end.
  - A full set of monthly FSIs regularly calculated by the BOJ, including liquidity ratios, within eight weeks of month end.
  - Monthly balance sheet data of deposit taking institutions, as reported to the BOJ, within four weeks of month end.

- Quarterly (reporting lags specified):
  - Holdings of government bonds (J$-denominated and US$-denominated) by holder category. The reporting lag should not exceed four weeks after the closing of each month (this would not be applicable to external and non-financial institutional holdings of GOJ global bonds as this information is not available to GOJ).
  - Use of the PetroCaribe Development Fund, including loan portfolio by debtor and allocation of the liquidity funds in reserve within six weeks after month end.
  - The stock of self-financed public entities non-guaranteed debt.
  - Summary balance of payments within three months after quarter end. Revised outturn for the preceding quarters and quarterly projections for the forthcoming year, with a lag of no more than one month following receipt of the outturn for the quarter.
  - Gross domestic product growth by sector, in real and nominal terms, including revised outturn for the preceding quarters within three months after quarter end; and projections for the next four quarters, with a lag no more than one month following receipt of the outturn for the quarter.
  - Updated set of macroeconomic assumptions and programme indicators for the preceding and forthcoming four quarters within three months of quarter end. Main indicators to be included are: real/nominal GDP, inflation, interest rates, exchange rates, foreign reserves (gross and net), money (base money and M3), credit to the private sector, open market operations and public sector financing (demand and identified financing).
  - BOJ’s Quarterly Financial Stability Report.
  - Quarterly income statement data of deposit taking institutions, as reported to the BOJ within eight weeks of the quarter end.
  - Summary review of the securities dealer sector, within eight weeks of quarter end.
  - Summary report of the insurance sector (based on current FSC quarterly report), within eight weeks of quarter end.
  - Capital adequacy and profitability ratios (against regulatory minima) for DTI’s and non-bank financial institutions within eight weeks of quarter end.
  - FSC status report detailing compliance (and any remedial measures introduced to address any non-compliance) with the agreed guidelines for the operation of client holding accounts at the Jam Clear@ CSD and FSC independent verification of daily reconciliations using data provided by Jam Clear@ CSD. Reports are due within four weeks of end quarter.

*Source: _cr16350 - 50. In particular, this target comprises spending on specific capital and recurrent*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2016/_cr16350.pdf_