Jamaica: On the Path to Higher Economic Growth

IMF News, November 7, 2019

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Jamaica successfully concluded an economic reform program supported by a US$1.66 billion Stand-By Arrangement from the IMF.
Program objectives: restore economic stability, sustain higher growth, create jobs, and protect the most vulnerable.

Prolonged period of very low growth prior to IMF-supported programs.
Public debt of about 145 percent of GDP, accumulated over several decades of weak policy implementation.
High borrowing needs led to financial repression and crowding out of private sector credit and investment.
High debt servicing costs constrained the government budget and limited spending on infrastructure and social assistance.
Weak external position: current account deficit of around 12 percent of GDP and low net international reserves of around US$0.9 billion in 2012.

Public debt has fallen by about 50 percent of GDP and is on track to reach the legislated 60 percent of GDP target by FY25/26.
Unemployment rate is at an all-time low—at about 7.8 percent.
Current account deficit and inflation are described as subdued.
Foreign reserves have been rebuilt to comfortable levels.
Monetary policy is on track to bring inflation to the mid-point of the Bank of Jamaica’s target band.
Growth has improved, supported by mining, construction, and agriculture industries; however, the outlook is weaker than envisioned at the start of the programs, and poverty remains high.

Need to continue building domestic institutions: fiscal council, an independent central bank, a disaster financing policy framework, and a well-functioning governance framework for public bodies.
Prioritize meaningful transformation of the public sector:
- Reassess and prioritize government functions.
- Redesign public sector compensation.
Fiscal policy must create space to address growth impediments:
- Large infrastructure and skills gap.
- High crime.
- Low financial access and inclusion.
- Inadequate social safety net.

Strong ownership across political spectrum and steadfast reform implementation.
Bipartisan support for fiscal discipline and social consensus to sustain reforms.
Broad stakeholder engagement: private and public sectors, civil society, unions.
Role of the Economic Programme Oversight Committee (EPOC) in championing and monitoring reform commitments.
Use of phased implementation for difficult reforms (examples cited: switch from direct to indirect taxes, increasing public employees’ pension contributions, central bank recapitalization implemented over multiple years).

Continued partnership through regular economic health checks and capacity development tailored to Jamaica.
Ongoing technical assistance areas: economic and fiscal capacity building, foreign exchange and capital market development, and risk-based supervision.
Jamaica’s Resident Representative’s office will remain open for two additional years to coordinate efforts and support authorities’ needs.

Source: Jamaica: On the Path to Higher Economic Growth (IMF, November 7, 2019).